It is a trend which began to win increasing favour in the months after the pandemic broke out and has steadily increased in momentum since.
Employee ownership is now an extremely popular and established succession planning solution for company owners in Scotland, with more than 170 businesses having now made the move north of the Border, and there are many reasons why.
Some of those were set out today by the two latest companies in Scotland to undertake the transition, Stirling-based steel stockholder Alexander (Scotland) & Co, and Livingston chartered accountancy firm Glen Drummond.
READ MORE: Edinburgh: financial planning firm bought out by management
Many company owners who decide to go down this route have cited a desire to protect jobs and ensure that long-established firms remain part of the community in which they have been built up in the years to come.
Passing the equity of such firms into the hands of a workforce, often by placing shares into an employee ownership trust, can be a way of rewarding staff who have played a key role in contributing to the success of a business, and can motivate them to continue doing so in the future.
As such, it can help soothe any worries an owner may have regarding the future of a firm which has perhaps been built up by previous generations of their family. Indeed, while an owner may conceivably receive a higher price from an external buyer, such bids do not bring any guarantees over jobs, or over the location of the business in future.
READ MORE: Scottish hospitality fears 'multi-million-pound blow'
That need for assurance appeared to be uppermost in the mind of Glenn MacLachlan, outgoing owner of Alexander (Scotland), who was keen to do the right thing for a business which was founded by his grandfather seven and half decades ago. Declaring that creating an employee ownership trust to hold the equity on behalf of his staff “seemed to tick a lot of boxes”, Mr MacLachlan said that he can “retire now knowing that I have left the business in safe hands”.
Asked for her thoughts on the increasing popularity of employee ownership, Carole Leslie of Ownership Associates told The Herald today that it is down “pure and simply” to awareness of the model growing all the time.
Ms Leslie observed that firms often see an “uplift in performance” after moving into employee ownership, which can result in former owners receiving payment for the shares they have passed over to staff more quickly. And, she noted, the employees themselves also have the potential to earn bonuses under the model.
“Because the shares are held in trust on behalf of the employees, the individual employees do not qualify for dividends,” she said. “The trust waives its right to a dividend and this cash is used to pay a bonus to employees (via payroll) which is free of income tax up to an annual limit of £3,600 per annum.”
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here