This means employees must have both:

• a financial stake in the business (eg by owning shares)
• a say in how it’s run, known as ‘employee engagement’

Financial stake

It’s easier for companies limited by shares to set up employee ownership. Other types of business (eg charities or sole traders) may have to change their legal structure so they can sell shares. Employee-owned firms may operate as co-operatives.

There are 3 options:

• direct employee ownership – employees hold shares in the business directly, often through a tax-advantaged share scheme
• indirect employee ownership – an employee benefit trust holds shares or other assets on behalf of employees
• a combination of direct and indirect ownership

Employee engagement

Employees must have a say in how the business is run.

Different ways of engaging employees are suitable for different businesses, but can include:

• an employees’ council, or other consultation group
• a constitution defining the company’s values and its relationship with employees
• employee directors on the board, with the same responsibilities as other directors
• working with trade unions on issues like pay and conditions

Who can set up employee ownership, employee shares and engagement, employee directors, model documentation