Facebook Live | Employee Ownership FAQ's - YouTube

Good morning and happy employee ownership day. 200,000 employee

owners will be celebrating today across the UK as owners of the businesses

that they work for. Here at Stephens Scown we're also joining in those celebrations,

it's the largest law firm to be employee owned. In this Facebook live I'll be

talking about employee ownership, try and answer some questions - if I forget

anything my colleague Sam behind the iPhone will probably give me a nudge or

throw something at me so we'll see how it goes. Best introduce myself first, my

name is Christian Wilson I'm a corporate commercial law partner at Stephens Scown

here in Truro, I lead our employee ownership team and I'm also a trustee of the

employee ownership trust. So I thought this morning I would try and address

four questions about employee ownership the what, how, when and why so here goes.

For anyone that's just joined I'm Christian Wilson this is a talk

about employee ownership if you're interested. So what is employee ownership?

Well essentially any business that brings in the employee group into an

ownership position varies widely between businesses but generally once the

employees have got a tangible stake in the business they become employee owned, some

companies are fully employee owned and others are just starting that journey;

Lush for example, the cosmetics company, last year transferred 10% of the

company to its employees and most people will be familiar with John Lewis' wholly

employee-owned company. The sector is pretty wide it includes retailers

manufacturing, professional services, health care, and many more there's no

area that would not be suitable to consider employee ownership - the key

point is that it's not simply the point at which employees own the company

outright but the inclusion of the employees as tangible owners which is

more than a profit share in the business. So how do you become employee owned? Well,

you could say it's as simple as offering all employees a share in the company

and that would certainly be a start but the reality is a little bit more complex

than that because as you issue shares your'e giving business value away, for some

company owners that may well be fine but most will wish to manage the

transition and also take the opportunity to release some values to themselves

for pensions and retirement. There are many variations on the theme but two standout:

direct ownership of shares by employees purchasing shares in the

company over time, this may lead to an internal market for the shares as

employees choose to invest in the company or release funds as they

approach retirement. In direct ownership of shares through a trust which holds

all of the employee shares for the benefit of the employees slightly easier

to manage but it's less tangible ownership, the process of

becoming employee owned for an existing company would be a little bit

like a phased management buyout and therefore it's an important option for

succession plans for businesses - which brings me neatly to when to become

employee owned. So succession is a prime opportunity to consider employee

ownership as well as considering a trade sale or a management buyout, founder

owners ought to be thinking about an employee buyout

not least because it can be less stressful and secure the culture of the

business for the future but there are also some potential tax bonuses as

well: 0% CGT on the sell and the employees may be able to take a £3600

profit share free of income tax, what's not to like about that. Formation is

another time, build it into the business from the outset, it would be deeply

ingrained by doing so and the culture is set from day one of that business and

of course at any time there is no right or wrong time -

many businesses might want to take advantage of the many perceived

advantages of employee ownership and give themselves a performance boost

as revealed by the ownership effect inquiry. Which brings me on to why become

employee owned? So I was fortunate this week to be at the launch of the

ownership effect inquiry this week and last year I gave evidence to that on

behalf of Stephens Scown in terms of our experience of employee ownership. The

results ought to make businesses think very seriously about employee ownership. So some

stats that came out from the survey and a little bit further afield, 56% of

employee owned businesses experience better employee performance as a

consequence of employee ownership. 69% of them report increased employee input in

strategic decision-making and 58% of the public believe that EO businesses are

more trustworthy; so you know that's just three of the statistics to come out and

there are many more - a lot of extremely positive stuff from it. The effect on

businesses according to the report are so pronounced that the effect has been

referred to as the ownership dividend the report is an excellent overview and is

well worth reading. Here at Stephens Scown we've embraced employee ownership and

today we have had our profit share announcement, there may be a slight

productivity dip this morning but that's just the Scowners thinking about what

they might be spending it on. Anyway, so that's the sort of nutshells

of employee ownership, I hope that's been useful, I think there might be one

or two questions - I'll see if I can answer them. Yeah, I've been thrown some

questions so thank you for sending them in. Right, how easy is it to become

employee owned? Think of it in terms of succession, succession is something

that all business owners may need to do at some point, it's something you just

engage in it's no harder than say a management buyout

it delivers the future of continuity of the business if your'e thinking

at all about the future of the business it's not hard to think about employee

ownership and to build it into the future of the company - so it's not hard

and it's something that it should be thought of in any event. Is it true that

everyone at your company gets an equal amount of the profit share? Yes that's

true, the only difference is for part-time workers who get a

pro rata amount but from reception, secretaries, through to partners,

everyone gets the same amount if they worked the same hours which is unlike John

Lewis actually who have a slightly different version which relates to individuals

monthly remuneration. And how long does it take and when is the best time? The best

time and there's no right or wrong on that, the best time can be at

outset it can be at any time during the journey of the business but the key one

moment seems to be succession because that's a really good point at which to

think about putting it in. How long does it take to put in place?

Well a succession process can take a long time but that's because

people want to manage it over a period of time so that it's

not rushed so it could be, you know, it could be done in six months but the

reality is it's more likely to be a year or so to allow it to develop at a

timeframe that everyone's happy with. Okay, thank you.