Should Social Media Companies Consider an Employee Ownership Business Model?

Wondering whether to get your social media company onto the employee ownership train? We explore the benefits of it, here…

These days, recruiting fresh talent is hard, so making your company stand out amongst the crowd is paramount. Setting up an employee share scheme may just be one way for you to do this, without breaking the bank. It may also provide you with plenty more benefits where that came from.

As a social media company, you’re part of an extremely competitive and ever-growing niche. This is why keeping your business at the top of peoples’ radars is vital in order to hire the best people for the jobs.

In this article, we explore what employee ownership is, and the many benefits it provides business owners looking to make their social media company more attractive to prospective hires. Take a look…

What is Employee Ownership?

Put simply, employee ownership is when employees own some or all of the company through shares. There are three types of employee ownership that a company can adopt, including:

  1. Individual Share Ownership: when employees own shares in the company individually. This may be because they have purchased shares in the company like any other shareholder. Alternatively, they may have been given shares based on their value to the company, subject to income tax and National Insurance.
  1. Trust Ownership: this starts with the company owner setting up an Employee Ownership Trust (EOT), where the company shareholders must sell between 51 and 100 percent of the company to the EOT. Then, employees can own part of the company through this, based on their hours worked and their length of service etc. These shares work as a sort of benefit or bonus, tax-free.
  1. A Mixture of the Two: companies may also mix and match the two, distributing some shares to employees as individuals, and others as an EOT.

6 Reasons Why the Employee Ownership Model Could Benefit Social Media Companies

There are plenty of benefits to engaging in an employee ownership model. As a social media company, these reasons are as follows:

1. Boosts Company Culture

Owning shares in a company is sure to make employees feel part of a company that values their team. Not only this, but being part of an employee ownership trust, especially, ensures employees feels like part of a team, working towards a collective goal. All of this is sure to create a loyal and hard-working workforce.

2. Improves Productivity

As each employee has a financial stake in the success of the business, there’s no doubt that motivation will increase with employee ownership. People may be more likely to provide their thoughts on new ways to efficiently run the business, and get work done, as they are more invested in the outcome. This is sure to have countless benefits to the way the business is run, and the success of the company.

3. Creates a Committed Workforce

The above pointers of loyalty and productivity creates a workforce that is committed to the company, with a shared goal of business success.

4. Tax Benefits

There are various tax benefits for both employees and employers when it comes to employee ownership. This is because the UK government is looking to incentivise companies to become part of this growing collective. Some of these benefits include:

  • Capital Gains Tax exemption if part of the company is sold to an Employee Ownership Trust. The sellers will benefit from zero percent Capital Gains Tax, that would be payable for other types of business sale.
  • Employee Ownership payments act as Income Tax Free bonuses for employees of up to £3,600 a year. This amount, however, is not exempt from National Insurance.
  • Inheritance Tax does not apply to any shares sold to Employee Ownership Trusts.

There are, of course, certain conditions which apply to these tax benefits. However, the potential for these bonuses speaks for themselves.

5. Retains and Brings in Top Talent

The employee ownership model is still relatively new, and has only been adopted by a small number of companies across the world. The National Centre for Employee Ownership in America shows that there are just 6,482 employee-owned companies, as per the most recent data. Compared to the millions of businesses in the country, this number is a tiny blip in the pool.

Because of this, employee ownership is still a unique benefit that is sure to draw in new talent. After all, in a job market for employees who have the pick of the litter when it comes to job offers, these sorts of benefits are a real selling point.

Through this, you’ll be able to sell your social media company as one that truly cares about their employees, drawing in new talent. Alongside this, you’re much more likely to keep current talent through providing something that many other companies cannot match.

6. Exit Strategy for Company Owners

Anyone who owns a share of the company currently will be able to have greater control over who the share goes to. This provides more of a succession plan, keeping the business in the hands of people who care about it most.

What’s more, as we’ve seen, the tax benefits of employee ownership for business owners are ideal. So, when the share is sold, there are inheritance tax benefits on it, meaning you can leave knowing that everyone involved wins.

Why is Employee Ownership Good for Social Media Companies?

As a social media company, you’ll be wanting to hire people who are talented, inquisitive, and inventive thinkers. Having an employee-owned company model lends itself to hiring people with these sorts of qualities, as they’ll no doubt be looking ahead at the bigger picture.

Not only does employee ownership provide this, it also has many other benefits which we’ve explored in this article. Of course, we can’t forget about the potential drawbacks of EOS; we can’t leave without acknowledging these, for you to make an informed and balanced decision.

That said, we hope this article has provided you with some ideas about the many benefits of this business model. What do you think about giving EO a try?

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