Employee Ownership – A Better Model for Independent Training Providers
HIT Training Ltd has recently put a majority of its shares into an Employee Ownership Trust to benefit its staff. HIT’s CEO, Jill Whittaker OBE, tells us why and what it means to her colleagues.
You may have read recently that HIT Training has reached a big milestone in its 16-year journey – we have sold a majority shareholding to an Employee Ownership Trust (EOT), thus making our collective employees the majority shareholders of our company.
So why did we decide to do this?
When we started HIT in 2006 it was with money we raised from investment from our staff, a few suppliers and some friends. We knew every shareholder (we still do) and it was great that our staff could be part of the success of the business.
Over the years, some of those people have stayed with us, some have moved on to pastures new; a very small number have asked to sell their shares, thus presenting an opportunity for existing staff to buy some shares. Fundamentally, though, our shareholding was limited largely to those who were there at the beginning. Back in 2019, we discussed this as a board and decided to look into ways that we could widen our staff participation in the business.
We know that cash is tight, so selling chunks of shares at full market value to our colleagues would have meant that only people with deep pockets would be able to afford to buy shares, and we wanted everyone to have a real stake in the company, so that was out of the question.
Covid came and went and one day I was having lunch with Amanda who runs Rinova (who we work with on some of our non-apprenticeship programmes) and she mentioned that Rinova was an Employee Ownership Trust (EOT). I asked her about it and a plan started to form. Serendipitously, the next day I was in a meeting with our company lawyers and Noel, our legal partner, said “I don’t know why you don’t do an Employee Ownership Trust, it’s right up HIT’s street”. We looked into it, and finally, in April this year, we completed the transactions that mean the EOT is in place.
So what does it mean?
In total, 61.3% of the shares have been bought by the EOT, and put into the trust.
We have appointed a trustee to look after the interests of the EOT and they will make sure that we don’t do anything daft with the company that will be detrimental to the value of that investment.
In order to buy the shares back from shareholders and to put them into the trust we have used most of the cash in the business. Those selling shareholders benefitted from a tax free transaction. We have, of course, kept back what we need for day to day.
The rest of what we owe for the shares is in the form of loan notes to the shareholders, and that will be paid off out of profits over the next few years at which point we will reach what is known as “Financial Freedom Day”, which means we don’t owe any more to those shareholders.
As we get closer to that point we will consult with our colleagues to find out how they you want their interests as shareholders to be represented – that will still be via the appointed trustee who is already looking after their interests, but may also include an employee panel or board.
This transaction won’t mean that individuals have shares but that they are owned on trust for the employee as beneficiaries. Leavers will cease to be beneficiaries.
A benefit of EOT
One benefit of the EOT is that staff can participate in up to £3,600 of profit share tax free each tax year. We have decided that this should be on an equal basis whatever the role or salary, and will be pro-rata for any staff working part-time/shorter hours. We hope to make our first tax free bonus payment this year.
This gives our colleagues real skin in the game, and an opportunity to not only influence the profits of the company with their great performance but also to share in those profits. Our staff are really happy to be part of the ownership of our funny little company.
By Jill Whittaker OBE, Managing Director at HIT Training
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