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Why Employee Ownership Would Benefit FinTech Companies

Ever wondered how Employee Ownership could benefit your Fintech Company? Here are ten reasons why…

Why Employee Ownership Would Benefit FinTech Companies

Digital disruption is changing the way we live and work at lighting speed. Nowadays, traditional working models are little more than a distant memory. 

In the brave new world of 2022, we’re seeing a seismic shift in power from the employer to the employee, and employee ownership is very much having a moment. 

While these schemes can be extremely beneficial to both employee and employer, they are by no means ‘one size fits all’. It’s important to understand how employee benefit trusts work to know whether they would benefit FinTech companies or not. Let’s delve into more detail…

What is an Employee Benefit Trust?

An employee benefit trust, also known as employee ownership, is a scheme whereby a business gives its employees the opportunity to take ownership of the company by buying, earning or being gifted shares or stocks. 

While this is considered to be a fairly modern concept, some well established companies have been operating employee ownership for quite some time – including iconic department store brand, John Lewis, who first introduced employee ownership back in 1929. 

What are FinTech Companies?

This now well-known term stands for Financial Technology and refers to businesses which provide a product or service which encompasses both of these elements. 

An example of a FinTech company would be Paypal. An online and mobile app company, which allows customers to send and receive money securely without the need to share bank details, with third parties. 

In an increasingly digital world, FinTech is gathering momentum by the second due to the convenience and security that they offer to their customers.

How Does Employee Ownership Benefit FinTech Companies?

While we’ve mentioned that employee ownership may not be right for every industry, it can lend itself perfectly to the FinTech world. Here are a couple of reasons why:

1. Improves Employee Retention

We’re very much living in an employee’s world. In 2022 with more and more digital companies starting up every year, employees have the luxury of picking and choosing employers which offer the best packages, in terms of salary and benefits. 

This means that businesses are under pressure to compete for the top talent, a significant number of employees say that they view employee ownership as a desirable benefit when looking for a job.

2. Tax Breaks

A significant benefit for FinTech business owners is that they can take advantage of a not inconsiderable tax break.

Under the Finance Act of 2014 businesses, including FinTech companies,  can claim exemption from capital gains tax to the tune of £3600 per employee when they sell to an employee ownership scheme.

3. Improves Company Turnover and Growth

As well as tax benefits, FinTech companies can drastically improve their profits through employee ownership. This subsequently allows them to free up more funds in order to scale and grow the business.

4. Improves Employee Working Relationship

When a business adopts an employee ownership model, employees become (quite literally) more invested in the business.

When an employee owns a chunk of the company, however small, it removes the ‘us and them’ barriers, making the employee feel that, to an extent, they’re working for themselves. 

This tends to mean that they will work harder as they understand that the more money the company makes, the more cash they themselves stand to gain.

5. Just Rewards

Working within an employee ownership model is most definitely seen as a benefit to employees. Employers can use membership of the scheme within their reward system. 

Employees who feel valued will always be more productive and engaged. Offering this kind of reward is extremely effective in showing employees how much their contribution adds to the value of the company.

6. Gives Employees a Voice

Within the traditional model of working, owners and senior executives make all the important decisions while more lowly employees simply do as they’re told.

However, in an employee ownership model, the fact that staff own shares in the business means that they are also entitled to have a say in important matters. 

While decisions may ultimately still be made by directors and owners, employees have the satisfaction of having their voices heard. This creates a more democratic and happier workplace.

7. Removes Need for Outside Investment

A lot of businesses choose to sell some of a company in order to free up cash or to diversify. Although this is a viable way of getting the job done, it can be a frustrating and a time-consuming process. 

This will often involve finding suitable investors or stakeholders and then trying to convince them of the value and potential value, of the business in order to make the sale. 

With employee ownership, this problem is removed as, in many cases, employees know the business inside and out, therefore only too aware of its potential.

8. Improves Work Culture

We hear the term ‘company culture’ a great deal these days and there’s a good reason for that. Employees are no longer willing to work for a company which expects them to show up, shut up and follow rigid rules. 

Innovations such as employee ownership, when added to the mix, can have an incredibly positive impact on company culture. This is really important for modern businesses like FinTech companies as showcasing a great company culture is vital in attracting new talent (and even luring it away from competitors). 

Company culture is now so much more than just offering a good salary and benefit package. It’s about offering a superior working lifestyle which includes flexibility and high value benefits.

9. Entices Further Investment

Employee ownership is all about giving your employees the opportunity to hold shares in the company and highlighting the value of those shares. 

In turn, this is a great way of enticing further investment in the company as employee ownership helps to increase the company’s profile and visibility and showing it off to the world.

10. An Innovative Modern Move for Fintech Companies

FinTech companies are, by their very nature, at the cutting edge of business and are viewed as extremely modern.

These businesses can further highlight their commitment to innovation and a pioneering spirit by introducing new ways of working and rewarding employees such as employee ownership. 

In turn, this model also fosters a sense of innovation in employees who will feel more confident in offering up new ideas and suggestions.

Could Employee Ownership be the Best Future for Fintech Companies?…

Employee ownership can be extremely beneficial for employers and employees alike, however, business owners need to know what they’re getting into before committing to this model. 

The finance industry is traditionally quite old fashioned and, even in the modern world of FinTech, business owners may find that they have their work cut out for them when it comes to convincing existing partners and stakeholders of the viability of the model. 

For this reason, getting onboard with employee ownership is usually considerably easier for new companies than it is for more established ones.

It’s also important to think about how the scheme will work in practice. For example, will it be offered to all staff, only senior staff or will it be offered on a reward basis for long service and performance.

While these are all things to consider, there’s no doubt that, in the age of company culture, employee ownership is almost certainly the future for FinTech.

Please be advised that this article is for general informational purposes only, and should not be used as a substitute for advice from a trained employee ownership professional. Be sure to consult an employee ownership professional if you’re seeking advice about making your business employee owned. We are not liable for risks or issues associated with using or acting upon the information on this site.

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