Incentivise your employees

Employee-owned companies have received increased attention of late. The Government has backed the employee-ownership model as being vital in increasing employee productivity and making businesses more profitable in the long run. The most notable, and perhaps most successful, example is John Lewis, which is the UK's largest employee-owned company.

Evidence of increased productivity, staff loyalty and profitably is backed up by research by the Cass Business School. Its 2010 study found that employee-owned businesses (EoBs):

  • with fewer than 75 employees are more profitable on a profits-before-tax basis than non-EoBs
  • experience greater, and faster, employment growth than non-EoBs
  • experience a significantly higher annual sales growth of 11.08 per cent on average, compared with 0.61 per cent. 

As part of its ongoing commitment to reducing business regulation, the Government has introduced simplified rules to make employee ownership easier for businesses to administer.

Under the new rules regarding share buy-backs, businesses will find it easier to buy back shares when an employee leaves.
The changes to the Companies Act 2006 came into force on 30 April 2013 and allow:

  • shareholders to approve off-market share buy-backs by a simple majority, instead of by the previous three quarters approval rule
  • for a greater range of financing options for share buy-backs
  • companies to hold bought-back shares 'in treasury' so that they can be easily reissued to new employees or scheme joiners
  • advance approval of employee share buy-backs by shareholders, rather than on a case-by-case basis.

Making the announcement, employment relations and consumer minister Jo Swinson said: "Hundreds of businesses will benefit from the introduction of reforms that make direct employee ownership easier and simpler for both employers and employees."

It is hoped the changes, alongside the first Employee Ownership Day on 4 July, will raise awareness of the benefits of employee owned companies.

We can advise on tax-efficient ways of incentivising staff. Talk to us to find out more.