Posts Tagged ‘business succession’
This year the John Lewis Partnership celebrates a milestone anniversary that very few businesses can claim.
2014 marks 150 years since John Lewis opened his drapery shop in Oxford Street in London. It marks 150 years since he began a multi-billion pound business empire that, unbeknownst to him, would become a flag bearer for employee engagement and employee ownership across the world.
The early history of the business is well recorded. John Lewis himself was a sharp business man whose focus on offering quality products at tight profit margins established a successful model he was quickly able to build on. The proceeds allowed him to expand the business and rent and buy further properties. He famously purchased the controlling interest in the Peter Jones department store with a massive £20,000 in cash.
However, it was his son, John Spedan Lewis who saw the benefit of increasing employee engagement by giving the employees a share in the profits of the company. In 1914 John Lewis appointed Spedan Lewis as Chairman of Peter Jones. Spedan Lewis soon realised that his staff’s interests were not in line with his businesses interests and he chose to make some innovative changes. He developed a commission system and started regular meetings with staff. When he gained full control of the Peter Jones business he improved staff conditions, increased holidays, increased internal communication and instituted the first staff council. Profits increased and by 1920 Spedan had started distributing shares to his staff who were now known as Partners and thus, modern employee ownership was born.
In stark contrast, in 1920, John Lewis’ original store experienced staff unrest, a five week strike and eventually he sacked the whole staff of the shop. Not a great model for employee engagement!
Spedan Lewis gained control of the whole business when his father died in 1928 aged 92. The following year he set up a trust which enabled profit sharing to the businesses employees and by 1950 he had passed ownership of the John Lewis Partnership to trustees to hold the business for the benefit of those who worked within it.
John Lewis employees continue to benefit from Spedan Lewis’ progressive approach to employee engagement and employee benefits. The Partnership operates a comprehensive network of business forums and a Partnership Council to ensure that every employee has an outlet to feed into the development of the business. The Partnership publishes a weekly in house magazine, the Gazette, and each branch has its own magazine, The Chronicle – each of which offers feedback opportunities to management. The Partnership offers an extensive range of social activities for its partners including holiday venue Brownsea Castle, country estates and hotels and a sailing club. Its pension, insurance and holiday benefits are generous and after 25 years of service, partners are entitled to a six month, fully paid, break.
Of course, the most famous benefit of being a partner in John Lewis is the annual bonus. This year each partner received a bonus equivalent to nearly eight weeks of their salary based on a 15% profit. John Lewis has consistently shown a profit of over 10% since 2002-3 and as much as 17 – 20% on several occasions. The partners at John Lewis are richly rewarded for their achievements.
Today, the John Lewis Partnership is a £10.2billion turnover retail empire which encompasses John Lewis and other Department Stores, Waitrose grocery outlets and has a very successful online presence. There is no doubt that the John Lewis Model works.
So, why is this multi-million pound business relevant to a Welsh Co-operative Development agency?
The answer is simple. Employee owned business approaches can offer stability and growth to businesses where the owner or owners are looking to withdraw over a period of time, reducing the need to search for, potentially aggressive, buyers. This sort of business transition lends itself to giving employees the opportunity to learn the business, become empowered within it and eventually become the future business owners. John Lewis provides the template that people know and can relate to.
Employee ownership is a flexible approach. Many employee owned business are co-operatives where employees directly own a share in the business, some are multi-stakeholder models and some are owned by a trust on behalf of the employees. All of these approaches are marked by high employee involvement, exemplary engagement, innovation, above average attendance, productivity and in most cases, profit.
This employee engagement and empowerment fits in perfectly with the Wales Co-operative Centre’s aims and ethics. It also provides an alternative approach to addressing one of the biggest problems facing an ageing population of business owners in Wales – how to ensure a business continues when the owner decides it time to leave.
So, as John Lewis’ newest, eagerly anticipated, advertising campaign celebrating their 150 year anniversary hits our TV screens this bank holiday weekend, let’s raise a glass to John Lewis, an employee owned, employee engaged company that is 150 years young this year.
Happy Birthday John Lewis.
If you would like to know more about the John Lewis Partnership, visit the partnership website here.
If you would like to know more about employee ownership and business succession services available from the Wales Co-operative Centre, please visit our website or call our business consultants on 0300 111 5050.
David Madge is Marketing and PR
Officer for the Wales Co-operative Centre. He has an interest in employee
ownership and worker co-operatives.
On April 6th 2014, the UK Government will formally launch a range of tax incentives to help grow the employee ownership sector. There will be an exemption from income tax of £3,600 for certain payments made to employees of qualifying employee-owned companies, and the introduction of a relief from capital gains tax (CGT) for owners selling a controlling interest to a trust which operates for the benefit of all employees. Finally, a tax hook on which to promote employee ownership to those business owners considering their business succession options!!
Although the Centre is disappointed that direct forms of employee ownership, such as the worker co-operative model, have not been recognised, this is still a significant milestone for employee ownership. The tax incentives headline what has been a very busy 18 months of UK policy development in this area, stimulated in the main by the recommendations in the 2012 Nuttall Review of Employee Ownership, ‘Sharing Success ‘
To us at the Wales Co-operative Centre, employee ownership is an economic ‘no brainer’. Giving employees an ownership stake in a business changes their relationship with the business and encourages them to take a positive and proactive role in helping their company grow. Recent research by the Cass Business School supports this by showing that employee owned businesses are more stable and more resilient as a direct result of the employees gaining a real stake in the success of that business.
Here in Wales, we see employee ownership as a crucial succession option which can help keep jobs, business and skills in Wales. Unfortunately it is often the forgotten succession option, not being viewed as a mainstream idea by conventional business advisers. At the Wales Co-operative Centre, we have received support from Welsh Government and European Union Regional Development funding to implement employee ownership in Wales and are actively working with both businesses and advisers to put employee ownership firmly in the mainstream.
To mark the introduction of the new tax regime for employee ownership, the Wales Co-operative Centre is hosting a number of breakfast seminars looking at the benefits of employee ownership and how the new tax incentives can benefit business owners who would like to move on from the business.
The events in Cardiff, Carmarthen and Bodnant in North Wales will also consider the employee trust, how it fits with your business model, and the benefits of the model for the business owner and the employees. The seminars will be of interest to business owners interested in looking at their exit strategies and to business advisors who want to know more about the approach to advise their clients. To find out more click here.
In our view, tax should not be the sole driving factor to considering employee ownership. Many of our clients are driven by legacy, and see employee ownership as an approach that engages employees and puts them in charge of their own futures. It helps retain jobs and provides a platform for continued local business ownership and growth. However, having an additional incentive to help promote the employee ownership exit route is never a bad thing and we’ll be working hard to promote the new relief available to business owners here in Wales.
Let’s just hope those clever tax specialists don’t find some loophole which allows companies to abuse the incentive for purposes other than employee ownership, otherwise we could see it withdrawn from the market as quick as at arrived.
Further information can be found on the Wales Co-operative Centres Website http://www.walescooperative.org
Places can be booked directly by calling the Centre on 0300 111 5050.
Rhian Edwards is manager of the ERDF and Welsh Government Business Succession project at the Wales Co-operative Centre. Her team works with micro-businesses and SME’s across Wales to develop employee ownership approaches and employee ownership based succession planning.
New Capital Gains Tax rules encourage owners to sell to their staff / Rheolau newydd ar gyfer Treth ar Enillion Cyfalaf yn annog perchnogion busnes i werthu i’w staff
Business owners across the UK could be benefiting from selling their businesses to their employees when new Capital Gains Tax Reliefs come into force this April. Business owners who sell a controlling stake in their company to an Employee Share Trust, which is owned and run by all the businesses employees will be able to benefit from drastically reduced tax on the profit from the sale.
In Wales, the Wales Co-operative Centre is hosting a number of breakfast seminars looking at the benefits of employee ownership and how the new tax incentives can benefit business owners who would like to move on from the business.
The events in Cardiff, Carmarthen and Bodnant in North Wales will also consider the employee owned trust model, how employee ownership works and the benefits for the business owner and the employees.
The seminars will be of interest to business owners interested in looking at their exit strategies and to business advisors who want to know more about the approach..
Rhian Edwards is Manager of the Welsh Government and ERDF funded Succession project at the Wales Co-operative Centre. She commented,
“This new tax relief makes it extremely attractive for business owners to consider employee ownership as a planned exit strategy. It offers the best of both worlds, a tax efficient exit strategy and an approach that engages employees and puts them in charge of their own futures”.
Further information can be found on the Wales Co-operative Centres Website http://www.walescooperative.org/capital-gains-tax-events.
Places can be booked directly by calling the Centre on 0300 111 5050
Gallai perchnogion busnes ledled y DU elwa ar werthu eu busnesau i’w gweithwyr pan ddaw Ryddhad Treth ar Enillion Cyfalaf newydd i rym fis Ebrill eleni. Bydd perchnogion busnes sy’n gwerthu cyfran reoli yn eu cwmni i Ymddiriedolaeth Perchnogaeth Gweithwyr, sy’n eiddo i holl weithwyr y busnes ac yn cael ei reoli ganddynt, yn gallu elwa ar ostyngiad treth enfawr ar yr elw o’r gwerthiant.
Yng Nghymru, mae Canolfan Cydweithredol Cymru’n cynnal nifer o seminarau brecwast i edrych ar fanteision perchnogaeth gweithwyr a sut y gall y cymhelliant treth newydd fod yn fuddiol i berchnogion busnes a hoffai symud ymlaen o’r busnes.
Bydd y digwyddiadau yng Nghaerdydd, Caerfyrddin a Bodnant yng Ngogledd Cymru hefyd yn ystyried yr ymddiriedolaethau newydd, sut y mae perchnogaeth gweithwyr yn gweithio a’r manteision ar gyfer perchennog y busnes a’r gweithwyr.
Bydd y seminarau o ddiddordeb i berchnogion busnes sydd â diddordeb mewn ystyried eu strategaethau ymadael ac i ymgynghorwyr busnes sy’n dymuno gwybod rhagor am yr ymagwedd er mwyn cynghori’u cleientiaid.
Rhian Edwards yw Rheolwr y prosiect Olyniaeth dan nawdd Llywodraeth Cymru a Chronfa Datblygu Rhanbarthol Ewrop yng Nghanolfan Cydweithredol Cymru. Dywedodd,
“Mae’r rhyddhad treth newydd hwn yn hynod o ddeniadol i berchnogion busnes ystyried perchnogaeth gweithwyr yn strategaeth ymadael fwriadol. Mae’n cynnig y gorau o ddau fyd, sef strategaeth ymadael sy’n effeithlon o ran treth ac ymagwedd sy’n ymglymu gweithwyr a’u gwneud yn gyfrifol am eu dyfodol eu hunain.”
Mae rhagor o wybodaeth ar gael ar wefan Canolfan Cydweithredol Cymru http://www.walescooperative.org/capital-gains-tax-events.
Gellir cadw lle’n uniongyrchol hefyd trwy ffonio’r Ganolfan ar 0300 111 5050
Wales Co-operative Centre
The Wales Co-operative Centre was set up thirty years ago and ever since has been helping businesses grow, people to find work and communities to tackle the issues that matter to them. Its advisors work co-operatively across Wales, providing expert, flexible and reliable support to develop sustainable businesses and strong, inclusive communities. www.walescooperative.org
Succession and Consortia Project
The Wales Co-operative Centre’s Succession and Consortia project is funded by Welsh Government and European Regional Development Fund. It offers support to business owners and employees considering employee ownership and creation of worker co-operatives. It also offers support to businesses working to work together to form co-operative consortia.
Canolfan Cydweithredol Cymru
Sefydlwyd Canolfan Cydweithredol Cymru ddeng mlynedd ar hugain yn ôl ac ers hynny bu’n helpu busnesau i dyfu, pobl i gael gwaith a chymunedau i ddatrys y problemau sydd o bwys iddynt. Mae ymgynghorwyr y Ganolfan yn gweithio’n gydweithredol ledled Cymru, gan ddarparu cefnogaeth arbenigol, hyblyg a dibynadwy er mwyn datblygu busnesau cynaliadwy a chymunedau cadarn a chynhwysol. www.walescooperative.org
Prosiect Olyniaeth a Chonsortia
Ariannir prosiect Olyniaeth a Chonsortia Canolfan Cydweithredol Cymru gan Lywodraeth Cymru a Chronfa Datblygu Rhanbarthol Ewrop. Mae’n cynnig cefnogaeth i berchnogion busnes a gweithwyr sy’n ystyried perchnogaeth gweithwyr a chreu mentrau cydweithredol y gweithwyr. Mae hefyd yn cynnig cefnogaeth i fusnesau sy’n gweithio ar gydweithio i ffurfio consortia cydweithredol.
Yn ein hail flog ar y goblygiadau posibl o argymhellion Comisiwn Cwmnïau Cydweithredol a Chydfuddiannol Cymru, rydym yn edrych ar y potensial ar gyfer datblygu dulliau perchnogaeth gan y gweithwyr yng Nghymru.
Rhian Edwards yw Rheolwr y prosiect Olyniaeth a Chonsortia yng Nghanolfan Cydweithredol Cymru ac mae wedi ymwneud yn helaeth â gwaith yng Nghymru a’r Deyrnas Unedig yn codi ymwybyddiaeth o Berchnogaeth gan y Gweithwyr fel opsiwn olyniaeth hyfyw ac yn ddull o annog ymgysylltiad a thwf yn ein busnesau brodorol.
Mae adroddiad Comisiwn Cwmnïau Cydweithredol a Chydfuddiannol Cymru wedi awgrymu rhagor o gymorth ar gyfer grwpiau gweithwyr a fyddai’n ystyried perchnogaeth gan y gweithwyr fel dull o barhau â busnesau hyfyw sydd mewn perygl o gau, yn ogystal â thechnegau ariannu arbenigol i gefnogi’r gweithwyr i brynu’r busnes. Mae perchnogaeth gan y gweithwyr yn sbardun twf sydd eisoes wedi’i brofi felly mae’n gwneud synnwyr i godi ymwybyddiaeth a chefnogi model busnes sy’n dda ar gyfer y busnes, yn dda i’r gweithwyr ac yn dda i’r gymuned lle mae cartref y busnes.
Mae Ysgol Fusnes CASS, ysgol â pharch mawr tuag at yn City University, wedi bod yn flaenllaw ers llawer o flynyddoedd yn cyflawni ymchwil ar fusnesau sy’n berchen i’r gweithwyr. Roedd ei hastudiaeth yn 2010 “Model Growth: Do Employee Owned Businesses Provide Sustainable Advantage” wedi canfod bod busnesau sy’n berchen i’r gweithwyr yn fwy tebygol o fod yn wydn yn ystod yr “amseroedd da” (2005-08) a’r dirwasgiad (2008-09) na’u cymheiriaid mewn cwmnïau nad ydynt yn berchen i’r gweithwyr.
Yn ddiweddar mae Ysgol Fusnes CASS wedi cyhoeddi astudiaeth ddilynol sy’n dod i’r casgliad bod busnesau sy’n berchen i’r gweithwyr wedi dangos twf cryn dipyn yn uwch o ran trosiant gwerthiannau o’u cymharu â busnesau nad ydynt yn berchen i’r gweithwyr trwy gydol y dirwasgiad (hyd 2011). Cafodd hyn ei adlewyrchu yn y twf o ran niferoedd gweithwyr ac yng nghyfraniad y gweithwyr at broffidioldeb. Mae’r ymchwil hyn yn dangos er nad yw perchnogaeth gan y gweithwyr yn gwarantu twf – wedi’r cyfan, effeithir yn yr un modd ar fusnesau sy’n berchen i’r gweithwyr gan rymoedd allanol ag unrhyw fusnes arall – mae cynnydd mewn perchnogaeth ac ymgysylltiad gan y gweithwyr bron bob amser yn arwain at gynnydd mewn sefydlogrwydd a gwytnwch o’u cymharu â busnesau nad ydynt yn ymgysylltu’n effeithiol â’u gweithwyr.
Yma yng Nghanolfan Cydweithredol Cymru mae gennym ymrwymiad hirsefydlog i gynyddu ymgysylltiad gweithwyr a rhoi grym i unigolion yn y gweithle. Ychydig flynyddoedd yn ôl, gwnaethom gyhoeddi ‘Atal Bom Olyniaeth Busnes rhag Ffrwydro’ a oedd yn honni bod Cymru mewn perygl o golli canran afresymol o uchel o fusnesau bach brodorol dros y pump i ddeng mlynedd nesaf oherwydd olyniaeth a gynlluniwyd yn wael a disgwyliadau afrealistig o’r potensial am werthiannau masnach. Mae adroddiad y Comisiwn wedi cydnabod y mater hwn ac wedi ceisio mynd i’r afael â rhai o’r rhwystrau mawr tuag at y dull: ymwybyddiaeth, argaeledd cymorth ac arian.
Nid oes amheuaeth bod perchnogaeth gan y gweithwyr yn gynllun dilys a chynaliadwy ar gyfer olyniaeth busnes hirdymor. Fel yr esbonia Allan Meek, Cyfarwyddwr Rheoli Grŵp SCS Caerffili.
“I mi un o brif fanteision perchnogaeth gan y gweithwyr fel model ymadael ar gyfer perchnogion reolwyr yw’r rhyddid i fod yn agored am gynlluniau ar gyfer y dyfodol a bod yr ymadael yn cael ei gyflawni er lles y perchennog a’r busnes.”
Ceir tystiolaeth bod gan fusnesau â lefelau uchel o berchnogaeth gan y gweithwyr fanteision sylweddol o’u cymharu â’r rheini heb berchnogaeth gan y gweithwyr. Mae gan weithwyr sy’n berchnogion lefelau uwch o foddhad yn y swydd, yn cael mwy o ymdeimlad o lwyddiant, cyflawniad a sicrwydd swydd ac yn fwy tebygol o argymell eu lle gwaith na gweithwyr mewn busnesau nad ydynt yn berchen i’r gweithwyr.
Roedd Barry Wise yn un o bedwar cyfarwyddwr i sefydlu Aber Instruments yn Aberystwyth. Dywedodd:
“Mae Perchnogaeth gan y Gweithwyr yn sicrhau bod pawb yn croesawu diwylliant o ddidwylledd a gweithio fel tîm. Mae hyn yn arwain at yr holl weithwyr yn rhannu peth cyfrifoldeb am les y sefydliad ac mae hyn yn sbardun i broffidioldeb…Mae sefydlogrwydd hir dymor y cwmni’n cael ei wella trwy Berchnogaeth gan y Gweithwyr oherwydd bod y gweithwyr, sy’n adnabod y busnes drwyddi draw, yn cael lleisio’u barn am eu dyfodol. Mae hyn yn lleihau dylanwad allanol ac mae ein strwythur cyfranddaliadau’n sicrhau bod perchnogaeth yn aros “o fewn y pedair wal”.
Mae Gill Wilde o Skye Instruments yn Llandrindod o’r farn bod llawer o fanteision i berchnogaeth gan y gweithwyr,
“Y fantais gyntaf yw diogelwch swydd. Ni all randdeiliad allanol ddylanwadu ar ein cyfeiriad. Y gweithwyr sy’n gyfrifol am y llwyddiant, neu’r methiant. Mantais ariannol yw’r ail; mae gennym gynllun rhannu elw felly mae ein gweithwyr yn elwa’n ariannol o’n llwyddiant. Yn drydydd, mae gan ein gweithwyr lais. Mae ganddynt y cyfle i gyfrannu at unrhyw weithgaredd o’r busnes. Mae eu barn a’u hawgrymiadau’n cael eu hystyried o ddifri ac yn cael eu trin yn broffesiynol. Mae’r holl weithwyr yn gymwys i fod yn Ymddiriedolwyr ar Ymddiriedolaeth Buddiannau’r Gweithwyr neu’n Gyfarwyddwyr yn y cwmni.”
Mae Allan Meek o Grŵp SCS yn cytuno,
“Rydym yn defnyddio perchnogaeth gan y gweithwyr yn rhan o becyn cymorth ar gyfer ymgysylltu â’n gweithwyr sy’n rhan o’n strategaeth busnes craidd ac sydd yn ein tyb ni yn fantais gystadleuol. Mae’n anodd dweud faint mwy y mae hyn yn annog pobl i’w wneud ond mae’n dangos i’r gweithwyr bod eu barn nhw yn cyfrif.”
Gall perchnogaeth gan y gweithwyr hefyd helpu i sicrhau bod cwmnïau brodorol yn parhau’n frodorol. Fel yr esbonia Gill Wilde,
“Prin iawn yw’r cyfleoedd gwaith mewn ardaloedd gwledig nad ydynt yn gysylltiedig â thwristiaeth ac amaethyddiaeth. Mae trosglwyddo perchnogaeth Skye Instruments i’w weithwyr yn galluogi busnes uwch-dechnoleg i aros a thyfu yn yr ardal a pharhau i gynnig gyrfaoedd arbenigol i genedlaethau’r dyfodol.”
Mae Barry Wise yn cytuno,
“Rydym wedi gweld cwmnïau eraill yn gwerthu, ac o ganlyniad mae swyddi a a gwybodaeth wedi cael eu colli’n lleol. Roeddem yn benderfynol i beidio â dilyn y trywydd hwn. Mae Perchnogaeth gan y Gweithwyr yn golygu sefydlogrwydd a rheolaeth dros ein tynged.”
Y flwyddyn ariannol hon, mae eithriadau ar Dreth Enillion Cyfalaf wedi’u cyflwyno i annog perchnogion busnes i ystyried perchnogaeth gan y gweithwyr yn ddull hyfyw o olyniaeth. Pe bai argymhellion adroddiad Comisiwn Cwmnïau Cydweithredol a Chydfuddiannol Cymru yn cael eu dilyn mae gwir bosibilrwydd y gallai perchnogaeth gan y gweithwyr ddod yn fodel busnes cyffredin sy’n cael ei dderbyn yng Nghymru, ac yn un sy’n cyfrannu’n sylweddol tuag at economi Cymru.
In the second of our blogs on the potential implications of the recommendations of the Welsh Co-operatives and Mutuals Commission, we look at the potential for developing employee ownership approaches in Wales.
Rhian Edwards is Manager of the Succession and Consortia project in the Wales Co-operative Centre and has been heavily involved with work in Wales and the UK raising awareness of Employee Ownership as a viable succession option and as a means of encouraging engagement and growth in our indigenous businesses.
The Welsh Co-operatives and Mutuals Commission report has recommended increased support for those employee groups who could consider employee ownership as a means of continuing viable businesses which are at risk of closure as well as specialist funding mechanisms to support employee buy-outs.
Employee ownership is a proven growth driver so it makes sense to raise awareness of, and support, a business model which is good for the business, good for the employees and good for the community the business is rooted in.
CASS Business School, a highly respected school within City University has been at the forefront of research into employee owned businesses for many years. Its 2010 study “Model Growth: Do Employee Owned Businesses Provide Sustainable Advantage” concluded that employee owned businesses are more likely to be resilient in both the ‘good times’ (2005-08) and recession (2008-09) than their non-employee owned counterparts.
CASS Business School has recently published a follow up study which concludes that employee owned businesses showed significantly higher growth in sales turnover relative to non-employee owned businesses throughout the recession (until 2011). This was reflected in higher growth in employee numbers and in employee contribution to profitability. This research demonstrates that although employee ownership is not a panacea that guarantees growth – after all, employee owned businesses are just as effected by external forces as any other business –increased employee ownership and engagement almost always results in increased stability and resilience than those businesses that don’t engage effectively with their employees.
At the Wales Co-operative Centre we have a long standing commitment to increasing employee engagement and empowering individuals within the workplace. A few years ago, we published ‘Defusing the Business Succession Time-bomb’ which asserted that Wales was in danger of losing an unreasonably high percentage of indigenous small enterprises over the next five to ten years due to poorly planned succession and unrealistic expectations of the potential for trade sales.
The Commissions report has recognised this issue and tried to address some of the big barriers to the approach: awareness, available support and finance.
There is no doubt that employee ownership is a valid and sustainable plan for long term business succession. Allan Meek, Managing Director of Caerphilly based SCS Group explains,
“For me one of the main advantages of employee ownership as an exit model for owner managers is the freedom to be open about plans for the future and for the exit to be conducted for the mutual benefit of the owner and the business”
There is evidence that businesses with high levels of employee ownership have substantial advantages over those without. Employee-owners have higher levels of job satisfaction, feel a greater sense of achievement, fulfilment and job security and are more likely to recommend their workplace than employees in non-employee owned businesses.
Barry Wise was one of four founding directors in Aberystwyth based Aber Instruments. He states,
“Employee Ownership ensures that everyone embraces a culture of openness and team-working. In turn this leads to all employees sharing some responsibility for the well being of the organisation and this drives profitability… The long term stability of the company is enhanced by Employee Ownership because employees, who know the business inside out, have a say in their future. This minimises external influence and our share structure ensures that ownership stays “within the four walls”.
Gill Wilde from Skye Instruments in Llandrindod Wells believes that the benefits of employee ownership are multiple,
“The first benefit is job security. No external shareholders can influence our direction. The success, or failure, is down to the employees. The second is financial; we have a profit sharing scheme so our employees benefit financially from our success. Thirdly, our employees have a voice. They have the opportunity to contribute to any activity of the business. Their views and suggestions are considered seriously and treated professionally. All employees are eligible to act as Trustees on the Employee Benefit Trust or as Directors in the company.”
Allan Meek of SCS Group agrees,
“We use employee ownership as part of a toolkit for engagement of our employees which is part of our core business strategy and we believe a source of competitive advantage. It is hard to say how much this alone encourages people to go the extra mile but it goes a long way to show employees that their opinions count”.
Employee ownership can also help ensure indigenous companies stay indigenous. As Gill Wilde explains,
“There are limited job opportunities in rural areas that aren’t connected to tourism and agriculture. Transferring the ownership of Skye Instruments to its employees enables a high tech business to remain and grow in the area and to be able to continue to offer specialist careers to future generations”.
Barry Wise concurs,
“We have seen other companies sell out and, as a result jobs and know-how have been lost in the locality. We were determined not to go that way. Employee Ownership brings stability and control over our destiny”.
In the new financial year, Capital Gains Tax exemptions have been introduced to encourage business owners to consider employee ownership as a viable means of succession.
If the recommendations in the Welsh Co-operatives and Mutuals Commission report are taken up there is every possibility that employee ownership could become a common and accepted business model in Wales, and one that makes a substantial contribution to the Welsh economy.
One of the main challenges business owners face with succession planning is deciding what form of exit suits them best. Should they go for a trade sale which will be likely to guarantee a lump sum and may be eligible for an element of Entrepreneur’s Relief – but may come at a cost of relocation, restructure or redundancies to the businesses employees?
Or, could a business owner consider an approach that is more likely to safeguard their employees’ jobs and that could also drastically reduce their exposure to capital gains tax when they sell a controlling stake in the business?
The Chancellors announcement today of a Capital Gains Tax Exemption to business owners on the sale of shares that result in a controlling interest in their company being held by an employee ownership trust is welcome news for those of us campaigning for greater awareness of the benefits of employee ownership.
The new proposals will also benefit employee owners via
changes to the income tax regime on bonuses paid to employees of companies that
are indirectly employee owned, and changes to thresholds on key
incentivised share plans.
This removes one of the last big barriers facing advocates of employee ownership as a succession option.
Previously, the Capital Gains regime in Britain had not made any distinction between a business sold for employee ownership and a business sold to another business purely for profit. A high level of employee ownership and engagement has been proven through various studies to increase the innovation and productivity within a business. The new exemption recognises this and now dangles a very enticing carrot in front of business owners who were previously unconvinced of the benefits.
At the Wales Co-operative Centre, we are grateful for the support we have received from both Welsh Government and through European Funding to promote and implement employee ownership in Wales. These new measures compliment the work we are already doing and should lead to a marked increase in indigenous employee owned business in Wales over the next few years.
For further information on how the Wales Co-operative Centre can help business owners to assess their companies’ suitability for conversion to employee ownership, visit the website www.walescooperative.org or contact 03001115050.
Rhian Edwards is manager of the Welsh Government and European Regional Development Fund succession project at the Wales Co-operative Centre.