Employee Ownership Claire Hobson, Deputy-Director BIS
2 What do we mean by employee ownership? • Employee ownership is where employees have both a voice in how the business is run through employee engagement and a financial stake in the success of the business. Employee Employee Employee Financial Engagement Ownership Stake • A common definition is: “A significant and meaningful stake in a business for all its employees” • It does not require employees to make any changes to their employment rights
3 Why is it important to the Government? • Employee ownership offers many benefits to employees, businesses and the wider economy. • Research suggests that it can: – Provide a catalyst for greater employee commitment, engagement and well-being in the workforce – Reduce absenteeism, staff turnover and accidents in the workplace – Produce substantially faster employment and sales growth , compared to non-employee owned companies – Lead to higher productivity and profitability , compared to non- employee owned companies – Display less variability over the economic cycle, giving a business greater resilience through times of economic difficulties
4 Quotes from the Deputy Prime Minister • “…a new Government drive to introduce the concept of employee ownership into the mainstream British economy” January 2012 • “…we need to give more ordinary working men and women a direct stake in growth. And, for me, that’s where employee ownership comes in…We’re talking about a big chunk of the company belonging to a significant number of staff” March 2012 • “My goal in Government is to help lay the foundations for a stronger and fairer society – and employee ownership helps do both.” March 2013
5 An independent review • In 2012 Norman Lamb (the then Minister for Employment Relations, Consumer and Postal Affairs) asked Graeme Nuttall, one of the foremost experts on employee ownership, to undertake an independent review into employee ownership. • The Nuttall Review was published on 4 July 2012 • It included 28 recommendations to reduce the barriers to greater employee ownership • In response, in October 2012, the Government said that it accepted/supported all 28 recommendations either in whole or in part
6 What did the Nuttall Review say? • Confirmed the substantial body of evidence demonstrating the benefits of employee ownership • Considered what factors hold back companies and employees from adopting employee ownership and what other measures might promote it further in the economy • The Nuttall recommendations fall under three key themes: – Raising awareness of employee ownership – Increasing the resources to support employee ownership – Reducing the complexity of employee ownership • In addition Nuttall recommended the creation of a Ministerial ‘sounding board’ to advise on implementation
7 Raising awareness • Nuttall recommended: – Ministers to promote employee ownership – Awareness of the business model raised: • within central Government • with businesses at key stages in business lifecycle (start-up, growth, succession and business rescue) – Improve data collection on businesses that are employee-owned – Consider a Right to Request employee ownership for employees
8 Increasing resources • Nuttall recommended: – The development by the industry of an Institute to: • provide guidance to businesses • provide a membership opportunity to individuals • provide accreditation to individuals • promote education about employee ownership • promote research into employee ownership – A single point of contact for provision of information and guidance about employee ownership – Ensuring intermediaries have adequate resources – Improving access to finance by EO businesses
9 Simplifying the complexity • Nuttall recommended: – ‘Off the shelf’ toolkits to make it easier for a business to become employee owned – An exemption from the 125 year perpetuity period for employee benefit trusts – Improving the operation of internal share markets to support those who use direct share ownership – Employee owned companies should not suffer unintended burdens due to their structure from new regulations
10 Who are we working with? Members of Implementation Group: ACAS • Jo Swinson (Minister for Baxi Partnership Employment Relations and CASS Business School Confederation for British Industry Consumer Affairs) has convened Co-operative Development Scotland an Implementation Group to Co-operatives UK oversee implementation. Employee Engagement Taskforce • Members include sector bodies, Employee Ownership Association intermediaries and ESOP Centre Federation of Small Businesses business/employee groups FFW • Cabinet Office, HMRC and HMT Gripple are also key partners ICAEW • John Lewis Partnership The Implementation Group has Prospects Services met three times and the minutes Santander can be found at: gov.uk Skye Instruments The Law Society TUC Wales Co-operative Centre
11 What progress has been made? • Raising awareness: – Call for Evidence launched in 2012 on Right to Request – decision taken not to implement a statutory right – Budget 2013 announcement of £30m annual funding for employee ownership from FY 2014/15 – Deputy Prime Minister gave the inaugural Oakeshott memorial lecture on 27 March 2013 – Plans being put in place for a national Employee Ownership Day later this year
12 What progress has been made? • Increasing resources: – The industry-led working group on the Institute has come to an agreed position on its scope/role – New guidance on employee ownership is in the pipeline – Access to finance forum was formed to consider what specific problems EO businesses face. This revealed that barriers are not related to businesses being employee-owned
13 What progress has been made? • Reducing the complexity: – Draft legal templates to become employee-owned are being refined by legal experts – Changes to Company Law have been approved by both Houses which will simplify the operation of internal share markets – Consideration being made of perpetuities exemption
14 Next steps • Finalisation of legal templates and guidance • Determination of future of proposed Institute • Consultation on Budget 2013 announcement • Delivering “EO Day”
15 Questions • What are your impressions of employee ownership? • How do you think awareness can best be raised? • Would you be interested in getting involved in an Employee Ownership Day?
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