Employee share plans can be a game-changing strategy for businesses looking to achieve their long-term goals whilst also fostering a culture of employee ownership.

They can be an excellent strategy if your long-term goal is to eventually exit your business – as this can allow for a smooth transition. Employee share plans are where employees are granted or can purchase company shares, making them partial owners of the company. These shares can be awarded as incentives, and there are several different routes of achieving this, including staging their way into equity. The goal is to align the interests of employees with the company's long-term goals and success. 
 

Why should you not worry about bringing employees into ownership? 
 

One of the key ways that an employee share plan can help achieve long-term goals is by adopting a sense of commitment among employees. When key employees have a stake in the company's future, they are more likely to stay with the organisation for a long period of time and are less likely to look at alternative roles elsewhere, due to the emotional and financial commitment they have to your business.  

Financial motivation 

Employee share plans provide employees with a financial incentive to remain with the company. As the value of their shares grows, so does their financial reward. This financial motivation encourages employees to remain within the company, even in a competitive job market, as they see the potential for their financial well-being and wealth increase. 

Higher productivity and increased morale  

When employees feel that their work directly contributes to the company's success and that they are shareholders, their morale and productivity typically increase. They are more likely to contribute their best efforts and innovative ideas, driving the company toward its long-term goals. 

Employees having an ‘Owner Mindset’ 

Employee share plans help inspire a culture of ownership where every employee feels connected to the company's mission and success.   Employees having a share of equity in the business brings an emotional and psychological elevation and helps in achieving a crucial shift from team members having an ‘employee mindset’ to an ‘owner mindset’.  Not only is it just a mindset shift but becoming an ‘owner’ through an employee share plan actually becomes a reality. 

Increase the value of your business  

When employees have a stake in the business, they are going to feel more dedicated and aligned to growing the business and driving towards the same goal. There is clear evidence that aligning key employees with the company goals with ‘skin in the game’, drives companies' growth faster and this leads to significant increase in the value of your business. 

Employee share schemes are a valuable tool that business owners shouldn’t fear. They have the potential to significantly contribute to achieving long-term goals and the fear of employee ownership can be dismissed by recognising that it can be a win-win situation for both employees and the company. When employees are given a stake in the company's future, it not only benefits them but also propels the company forward and a faster pace. In a business world that is continually evolving, employee share plans can be a crucial element for success. 

As a business owner, you have a lot on your plate.  However, you might just fear that bringing employees into ownership isn’t the right strategy for you.  As we’ve outlined in this article, there are significant benefits in providing employees with a stake in your business, and we believe that if the right employee share plan is implemented, and carefully managed, then this can be a vital catalyst to success for your business.  We would recommend you at least explore the different options, and our advisors can help you do just that. 

Exiting your business as a sole business owner is a significant life and career decision. It requires careful planning, clear goals, and a solid understanding of your motivations. So, ensure that you carefully consider what it is you want to do next, and how much money you are likely to need for those plans. A clear idea of your future plans will help shape your business exit plan 

We always recommend speaking to your advisors on the best steps before making any changes. If you would like to discuss your business exit plan or business exit planning options ways of bringing in key employees into share ownership, please get in touch. Our tax advisors are skilled in such transactions in helping implement the right type of employee share plan for your situation and can navigate the process smoothly. For more information on how we can help you and your business, please contact us via info@oldfieldadvisory.com or call 02476673160 for support and advice. Let’s work together to grow and strengthen your business.

Please note: This article is provided for information only and was correct as at time of writing (19/03/24). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.