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Why Employee Ownership Is A Good Business Plan During Economic Struggle

If you’re worried about your business model crumbling under the weight of an economic struggle, such as COVID-19, it might be time to consider employee ownership. 

There are a bunch of different business plans out there, but few of them are as game-changing as employee ownership. It truly flips the traditional model on its head.

If you want to learn more, you can swot up on some employee ownership and employee share scheme resources. In this post, we’re going to do the hard work for you, by explaining what employee ownership is, why it’s a good business model, and why it works especially well during an economic crisis like COVID-19. Let’s dive in…

Employee ownership

What is Employee Ownership?

To give you an idea of what employee ownership is before we get into why it’s a good model that works well in a crisis, here’s a little synopsis. 

Employee ownershipis a scheme where every employee in a business has a stake in it. The employees get both a financial stake and a say in how the company is run. It involves changing the whole legal structure of your business so that employees can own a controlling stake in it. Limited companies tend to find this easier because it’s not too dissimilar to the way they’re already divided. 

Employee Ownership Models

There’s a whole list of different employee ownership models, but the most popular ones tend to be those that receive significant tax breaks from the government. In the UK, the five schemes that are given tax breaks are:

  • Share Incentive Plans (SIPs): employees get £3,600 of free shares every year and, if they keep them for five years, they pay no Income Tax or National Insurance on them. They also don’t pay capital gains tax when they sell them.
  • Save As You Earn (SAYE): employees save £500 a month that they can use to buy shares at the end of their agreed contract (three or five years).
  • Company Share Option Plan: employees can buy up to £30,000 of shares at a fixed price, and pay no National Insurance or Income Tax on the difference between what they paid and what they end up being worth.
  • Enterprise Management Incentives (EMIs): these schemes give management a large stake in the company, offering shares up to £250,000. They don’t have to pay Income Tax or NI if they buy the shares at market value.
  • Enterprise Ownership Trusts (EOTs): this is the only ‘indirect’ ownership scheme on this list, as it involves selling shares to a trust who look after them on the employee’s behalf. They are exempt from Capital Gains Tax and have an Income Tax exemption of £3,600 a year on certain employee bonuses.

So, those are all the types you need to know about for now. Ultimately, employees own a stake in the business, enjoy tax breaks, and are rewarded.

The post Why Employee Ownership Is A Good Business Plan During Economic Struggle appeared first on Entrepreneurship Life.

Carson Derrow 2020-11-27 10:08:31

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The post Why Employee Ownership Is A Good Business Plan During Economic Struggle appeared first on Market World.

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