Baker Boys: The pros and cons of setting up a worker co-operative
The decision to set up a worker co-operative is a big one which will affect each employees work life, family life and potentially their financial stability. However, if the business succeeds the benefits would include long-term job security, financial security as well as ownership and control of the future of the business. It is essential that every employee is aware of this and is given the correct information to make their own decision.
So what are the cons of forming a worker co-operative? As we’ve seen on Baker Boys they could include:
- Arguments over money and working hours
- Potential loss of redundancy payment
- Extra stress of making a ‘new’ business work – especially in the early days
And the potential benefits of forminng a workers co-operative?
- Ownership of the business and a share in future profits
- A say in the future of the business
- The chance of long term security
- The chance of long term financial benefit
When Budelpack International, a Dutch owned packaging company, closed down, 19 staff members decided to invest their redundancy payment into setting up a new employee owned company. With manufacturing jobs on the decline in Wales the staff were keen to preserve their livelihoods and keep jobs in the local area. The Wales Co-operative Centre provided legal and business planning advice and helped the company access funding. The new company, PrimePac Solutions Ltd, makes bottles, sachets and tubes with clients including leading brands in the health and personal care sector. The company’s new production facilities in Ebbw Vale were opened at the end of 2005.
“Establishing our business co-operatively means that all employees feel that they can become masters of their own destiny and develop our company into a real success story for South Wales”, says Steve Meredith, Managing Director of PrimePac Solutions Ltd
As with any business communication and a widespread understanding of the aims and objectives of the business are paramount. But, in an employee buyout situation it is essential that everyone involved, including family members, are aware of the level of risk involved. In the case of PrimePac solutions the risk paid off and the company is now worth several times the investment paid into setting it up.
Some facts and figures about Employee Owned Businesses (EOB’s).
- EOBs with fewer than 75 employees do significantly better than non-EOBs of the same size measured by both Profit Before Tax and Profit Before Tax per employee.
- EOBs create jobs faster. EOBs experienced greater employment growth than their non-employee-owned counterparts in the period of economic growth from 2005 to 2008
- EOBs are more resilient: their performance is more stable over business cycles, displaying less sales variability.
- EOBs are better employers not only in consistently recruiting more employees but also by rewarding them with higher wages.
Source: “Model Growth: Do employee-owned businesses deliver sustainable performance” Cass Business School?
Back in Valley Bara, it seems that Rob is trying to break apart the co-operative nature of the business. Will he succeed? Here at the Wales Co-operative Centre we are looking forward to the third episode with baited breath to find out.
The Wales Co-operative Centre was set up thirty years ago and ever since we’ve been helping businesses grow, people to find work and communities to tackle the issues that matter to them. Our advisors work co-operatively across Wales, providing expert, flexible and reliable support to develop sustainable businesses and strong, inclusive communities.