How employee ownership trusts allow workers to own their business
Imagine you’re the owner of a successful Irish small and medium-sized enterprises (SME). You’ve built your business over decades and you’re now nearing retirement so the time has come to decide who replaces you. There’s no manager who can afford to buy you out, and no family to succeed you. Your options are limited: sell to a competitor or investor, or wind it down altogether.
But what if there was another way, one that allowed you to pass the business on to your employees, keeping it rooted in Ireland, while also rewarding you fairly? This is exactly what Employee Ownership Trusts offer. While they are popular and growing rapidly in the UK, Ireland is at risk of missing out unless our tax system catches up. In Ireland, a business is sold into foreign ownership every working day, curtailing the domestic economy.
What is an Employee Ownership Trust?
An Employee Ownership Trust allows a company to be owned collectively by all its employees without requiring each worker to buy shares. Instead, a trust acquires a significant stake in the business on behalf of the workforce. In the UK, this is at least a 51% stake and usually 100%. The selling shareholders are paid for their shares from the company’s profits. Essentially, the business buys itself on behalf of its staff. This typically takes several years, so as not to burden the business financially.
The employees don’t directly hold shares, differing this model from share ownership plans (e.g. the Eircom employee share ownership plan). A trustee administers the Employee Ownership Trust and the trustee’s board ensures the business is professionally managed with an employee ownership ethos that provides a good work experience for all staff, including employee engagement and profit sharing. This means an owner can secure a fair exit, while staff gain real influence and a tangible stake in the future success of the business.
The UK experience
This model has a 100-year history in the UK tracing back to the John Lewis Partnership. In 2014 the UK government codified the employee trust model in tax law as the EOT which raised awareness. Individuals who sell a controlling stake to an EOT in the UK don’t pay capital gains tax (CGT) on the transaction, and UK employees can receive up to £3,600 a year in income tax-free bonuses. Administrative burdens are also far lower compared to traditional employee share ownership plans.
The results in the UK are significant. Each year since 2014 an increasing number of businesses convert to employee ownership. In the first 10 years, 1,800 EOTs were established. This includes high-profile businesses such as Aardman Animation, makers of Wallace & Gromit.
Research shows employee ownership is good for business, employees and communities. Employee-owned businesses often report higher productivity, better staff retention and greater resilience in times of crisis. From a policy perspective, EOTs provide smooth succession planning for founders but also strengthen the domestic business base by reducing the risk of companies being sold abroad.
Ireland’s problem
Ireland has been slow to act. It has no history of employee trust ownership and an EOT-style structure faces punitive tax treatment under current rules compared with the UK. The problem is simple: it is more tax-efficient for an Irish business owner to sell to a multinational than to sell to their own employees.
A 2024 Department of Finance–commissioned review by Indecon concluded that Ireland’s tax treatment discourages the use of EOTs, despite their proven success abroad. It recommended aligning Irish policy with the UK by removing unnecessary taxes and clarifying anti-avoidance rules.
The Irish ProShare Association (IPSA) has taken up this call, proposing a two-stage reform. First, remove existing tax obstacles through clearer Revenue guidance and an exemption from discretionary trust taxes, ensuring sales to EOTs are not treated less favourably than trade sales. IPSA argues this would not reduce Exchequer revenues but simply level the playing field. Second, the Government should build on this foundation by adopting UK-style incentives, such as capital gains tax relief for sellers and modest tax-free bonuses for employees.
In May 2024, Dublin-based digital marketing agency Wolfgang Digital became the first and so far only Irish company to establish an EOT. The move attracted considerable attention, and a large cost to the owners relative to selling out. Part of the motivation was Wolfgang’s founder, Alan Coleman wanted to highlight that a company of employee owners will outperform competitors more than enough to justify the move.
It’s not just Irish companies that are affected. Several UK-headquartered firms with Irish branches, such as Seetec, already operate under the EOT model. In the UK, employees receive income tax-free annual bonuses, but the same companies in Ireland must “gross-up” payments to cover income tax and PRSI for their Irish staff. In practice, this means the cost of rewarding Irish employees under an EOT is significantly higher, creating inequality between UK and Irish workers in the very same organisation.
Why Ireland needs Employee Ownership Trusts now
Ireland has done a remarkable job of attracting multinational investment, but this has concentrated ownership and wealth in overseas hands. EOTs provide a practical succession route that keeps businesses in Irish hands. EOTs give employees a voice in their company’s success, often accompanied by profit-sharing bonuses. Evidence shows this boosts motivation, reduces inequality, and deepens commitment to the workplace. Employee ownership of SMEs would help spread prosperity more evenly, build resilience, and reduce over-reliance on foreign firms.
By making EOTs attractive, Ireland could lead in employee ownership, creating a model that benefits owners, employees, and communities alike. The government has already gathered the evidence and consulted stakeholders; the next step is to act, issuing clear guidance and removing tax barriers so Irish businesses enjoy the same opportunities as those in the UK, USA, Canada and beyond. When founders choose between selling out or selling in, public policy should make it easy to choose the latter.
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