This week, the largest gathering of employee owned businesses in the UK will head for the flagship conference held by the Employee Ownership Association, now in its 13thyear.
So is employee ownership the right next move to keep your business successful if you’re thinking of planning for its (and your) future?
An increasing number of business owners and founders seem to think so. The sector has been growing annually at a rate of 10%, with employee ownership now contributing approximately 4% of GDP annually to the UK economy, representing £30bn per annum.
The resilience of employee-owned companies during the 2008/9 recession spurred the government on to promote its benefits. During that economic downturn, research found that employee owned (EO) firms were more profitable and attracted more staff than traditional businesses.
A number of generous tax reliefs to support wider employee ownership was introduced in 2014, and government research this year shows enhanced productivity among EO firms.
The continuing uncertain economic climate and costs such as auto-enrolment and apprenticeship levies are all creating an impact, so if employee ownership provides more profit and a more productive and happy workforce, now might be the time to get advice on the options for your business going forward.
One of the South’s leading and largest chartered accountancy firms, Rothmans, specialises in advising on business succession planning.
Daren Laidlaw, Partner at Rothmans, says, “We look on it as our professional obligation to advise on employee ownership in the same way as management buyouts and trade sales. Interest in becoming EO as a method of succession is increasing, much of this stemming from the tax advantages. No capital gains tax is due when you sell your shares to an Employee Ownership Trust (EOT), compared with 10% charge on a standard shares sale, and an annual bonus of up to £3,600 can be paid to employees without being subject to income tax, where the Trust owns over 50.5% of the business. Clear accountancy guidance is essential as the focus on ensuring the long-term future of a business forms a large part of becoming EO.
“There are a number of options to consider, including a trade sale, management buyout, Employee Ownership Trust (EOT) or a combination. There are different forms of EOBs that are suitable for every sector and all sizes of business, whether you have three employees or several thousand. It is important that fundamental business disposal and business growthare considered equally, looking at management changes, financial and legal issues, and even the emotional aspect around the founder or owner’s chosen exit strategy.”
MindWorks Marketing, a multi-award winning agency based in Hampshire, recently celebrated its first birthday as an employee owned business after being guided through the process by Rothmans.
“We have built a strong caring ethos over the 20 years we’ve been in business and going EO offered us huge competitive advantages in terms of employee engagement and building for the future, as well as the tax breaks it gives us,” says MD Michelle Leggatt.
“Rothmans’ advice on every aspect, from the personal financial implications to the most tax-efficient options available was invaluable so that we could ensure the continued success of our strong and sustainable business.”