What are the Benefits of an EOT for Employees?
EOTs offer several key benefits to employees,
making them an attractive model for many businesses. Below are the main advantages from the employees’ perspective:
Financial Rewards
Tax-Free Bonuses: Employees can receive annual bonuses of up to £3,600 (in the UK, as of 2025) free of income tax, although National Insurance still applies.
Profit Sharing: Over time, employees may benefit from a share of company profits, depending on how the trust is structured and performs.
Job Security: EOTs tend to encourage long-term stability and employment continuity since the business is not sold to external buyers who might restructure or cut jobs.
Greater Engagement and Motivation
Sense of Ownership: Even without holding individual shares, employees know the company is collectively owned on their behalf, which can increase pride, loyalty, and motivation.
Improved Morale: Employee-owned companies often see higher levels of morale and teamwork, especially when the ownership model is clearly communicated and understood.
Influence and Voice
More Democratic Culture: Many EOTs give employees a greater say in how the business is run, either through employee councils, trustee representation, or regular consultation.
Transparency: Employee-owned companies often promote open communication about performance and strategy, building trust between management and staff.
Long-Term Company Success
Sustainable Business Practices: EOTs are typically less driven by short-term profits and more focused on long-term growth, ethical behaviour, and stability – benefiting employees over time.
Resilience in Downturns: Evidence suggests employee-owned firms may weather economic challenges better due to higher engagement and internal trust.
Protection from External Takeovers
Employees are less likely to experience sudden changes in leadership, culture, or structure due to external acquisitions, which can be common in private equity or trade sales.