Government publishes review on employee ownership

The government has published the Nuttall Review on Employee Ownership.

Employee ownership is when employees own a significant stake in the organisation they work for, sometimes termed co-owned organisations.

The review, which was commissioned by deputy prime minister Nick Clegg in January 2012, summarises existing research literature on the benefits of employee ownership, identifies the key barriers to uptake, and makes a number of recommendations on how to reduce these barriers.

The review identified three key barriers to further uptake of employee ownership in the private sector:

  • A lack of awareness of employee ownership. The concept of employee ownership is not widely known, and is undermined by misperceptions. Opportunities to adopt employee ownership are lost when employers, employees and advisers are unaware of its relevance and benefits.
  • A lack of resources, including finance, to support employee ownership. The review found that the existing information and guidance available on employee ownership is insufficient.
  • The complexity of employee ownership. The review heard that setting up as an employee-owned company was associated with legal, tax and regulatory complexity. Whether this is perceived or real, it can discourage people and add extra compliance burdens onto existing.

Key recommendations of the review are: 

1.)†† Government and the sector should raise awareness of employee ownership, through:†

  • Promoting a clearer identity for employee ownership.
  • Advocacy work by government and the sector, and in particular to ensure that employee ownership is considered as an option at more stages of the business lifecycle.
  • A new right to request employee ownership, aimed at encouraging employees and their employers to discuss employee ownership proposals within their companies.

2) Government and the sector should increase the resources available to promote employee ownership, through:

  • A sector-led Institute for employee ownership, to lead on information and guidance on employee ownership; and support employers adopting employee ownership as well as existing employee-owned organisations.
  • Better promotion of the various sources of finance that can be well suited to employee-owned organisations.

3) Government should make it easier to set up and run an employee-owned organisation, through:

  • Creating simplified off-the-shelf models of an employee-owned organisation, which reduce the complexity and uncertainty of the process. Model templates and toolkits would provide all the information and guidance necessary to complete the process quickly and easily.
  • Regulatory reform to simplify the processes underlying operating an employee-owned organisation.
  • Reviewing other regulation and tax policy to ensure complexity is minimised.

4) Measures to ensure implementation and maintain progress:

  • A one-year on report to monitor progress in implementation.
  • A sector steering group to advise the minister on the views of the employee ownership sector.

Iain Hasdell, chief executive of the Employee Ownership Association, said: “At a time when employee ownership is growing this review marks another important step along the way towards employee ownership becoming a central part of UK industrial policy.

“I particularly welcome the accuracy with which the review assesses the barriers to the growth of employee ownership as being about awareness, understanding, access to finance and advice and aspects of the taxation system. The recommendations in the review offer a coherent route to removing those barriers.”

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The review is open until September 2012.

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