Employee ownership businesses

Employee ownership is where all employees have a ‘significant and meaningful’ stake in a business.

This means employees must have both:

  • a financial stake in the business (eg by owning shares)
  • a say in how it’s run, known as ‘employee engagement’

Financial stake

It’s easier for companies limited by shares to set up employee ownership.

Employees hold shares in the business through share schemes like Share Incentive Plans (SIPs). They may pay less tax if it’s an approved scheme.

Other types of business (eg charities or sole traders) may have to change their legal structure so they can sell shares. Employee-owned firms may operate as co-operatives.

Employee engagement

Employees must have a say in how the business is run.

Different ways of engaging employees are suitable for different businesses, but can include:

  • an employees’ council, or other consultation group
  • a constitution defining the company’s values and its relationship with employees
  • employee directors on the board, with the same responsibilities as other directors
  • working with trade unions on issues like pay and conditions

Guidance and model documentation

Read the guidance and model documentation for more information about types of ownership and engagement.

There’s a separate guide for employees who want to request a move to employee ownership.

You can also read guidance on the tax issues around Employee Share Trusts and when employees sell their shares.

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