Employee ownership - what does it mean?

If you have a share in the company you work for, you have a naturally greater interest in its success.

Employee Ownership companies have performed better in good and bad economic times . The Government recognises this and will be setting aside £50m per year to help businesses adopt employee ownership and will give Capital Gains Relief for those who sell a controlling stake in a company to their staff.

Employee ownership means a significant and meaningful stake in a business for all its employees.  What is meaningful is not confined to financial participation. Irrespective of any financial participation, employees must have access to organisational structures that ensure employee engagement.

Where financial participation takes place there is no set rule on what percentage of issued share capital is a significant and meaningful stake.

Employee ownership can generally take one of three forms:

1. Direct employee ownership - employees become individual owners of shares in their company;

2.Indirect employee ownership - shares are held collectively on behalf of employees, normally through an employee benefit trust;

3. Combined direct and indirect ownership - a combination of individual and collective share ownership.

Deputy Prime Minister, Nick Clegg said: "The benefits of employee ownership are clear. Staff who have a stake are more motivated and are rewarded for thinking in the long-term. That's good for business and good for families, as it means lower absenteeism and lower levels of staff turnover. That's why from next April, the government has set aside £50 million each year to give businesses and employees an incentive to adopt employee owned models. We'll be providing Capital Gains Tax relief for those who sell a controlling stake in a company to their staff."

Businesses with employee ownership have delivered strong shareholder returns. Since 1992, the Employee Ownership Index (EOI) has outperformed the FTSE All Share by an average of 10% annually.

An investment of £100 in the EOI when the index began in January 1992 would at the end of September 2012 have been worth £661 whilst the same investment in the FTSE All-Share Index would only be worth £244.

Business Secretary Vince Cable said: "As we rebuild the economy, there has never been a more important time to support different ways of running a business. The evidence is clear that employee owned businesses not only help us build a stronger economy, but boost the retention, innovation and motivation of their employees."

For more information and links, go to http://employeeownership.co.uk/news/events/employee-ownership-day-2013/