Government to support more businesses to become employee-owned

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The Government wants to help boost the size of the business sector, by ensuring employee ownership is more widely understood and easier to establish.

Responding to recommendations made by independent Government advisor Graeme Nuttall in his independent review of the sector, the Government has approved plans for a range of activity that will help to grow the number of businesses that convert to the employee ownership model.

The proposal received mixed reviews from businesses.

Simon Jones director at HR consultancy firm Ariadne Associates, told HR magazine: "Employee ownership is a good idea and worth promoting, but not as a panacea for all HR ills in a business.

"In fact HR people need to adopt a different mindset and approach to employee relations and engagement as well as understanding the ownership issues.

"I am at a loss why the BIS proposals make no reference to the rights for shares issue being consulted on by the Government. Giving up employment rights for a shareholding is unlikely to be attractive to most employees

Carol Dempsey, partner at professional services firm PWC, told HR magazine: "What we need is clear, sensible and simple tax rules as the Government just isn't addressing these issues to help businesses implement such plans."

Dempsey added: "The measures announced will not directly benefit employees as they are simply aimed at raising awareness, not making the path easier for businesses.

"If the Government wants to encourage more businesses to become employee-owned, we need to see more action aimed at simplifying the tax system and operational environment. None of the measures announced address this."

The Government's plans include assessing whether to establish an independent Institute for Employee Ownership, an 'off the shelf' model for setting up an employee owned business, work to examine the guidance on tax issues relating to employee ownership, a guide for staff and employers to request and agree an employee ownership takeover and working with the John Lewis Partnership to examine the barriers to funding for private sector employee-owned companies.

Deputy prime minister, Nick Clegg said: "Businesses that are owned by their employees produce more, grow faster, keep their workforce happier, and pay staff more fairly.

"Graeme's report makes clear that sharing ownership means sharing success."

Clegg added: "Our economy suffered a massive heart attack - now we have to build our strength back up. To pump oxygen back into the system and get Britain working again, it's got to be out with the old and in with a new more diverse economy that is fairer for all."

Bill Cohen, partner at finance firm Deloitte told HR magazine: "The BIS proposals are aimed at simplifying matters.

"Firstly, instead of having to use employee benefit trusts, private companies will be allowed to purchase the shares that their employees wish to sell into treasury. This brings them in line with public companies and is likely to prove popular."

Swinson commented: "There has never been a more important time to create the right environment for different ways of running a business. Employee-owned companies have proved to be flexible and resilient during tough times, and have a clear role to play in securing long-term economic growth.

"I'm very pleased to be taking the first steps to implementing Graeme Nuttall's recommendations."

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