Employees want a slice of the pie

A new lobby group wants Canada to embrace the idea of employee-owned businesses.

What happened: The Canadian Employee Ownership Coalition is pushing the federal government to change the country’s tax laws to let employees buy out a company they work for through the use of something called an employee ownership trust.

  • Owners who sell their business to employees would get a sweet tax deal, while employees wouldn’t be on the hook themselves for the financing—the loan for the purchase would be paid down over time using the company’s earnings.

Countries like the UK and the US have encouraged employee ownership, with successful results.

  • Britain’s model involves offering employee-owners an annual, tax-free bonus based on company profits. The country has seen almost 500 EOTs set up in about a year.
  • The US model involves employees accumulating shares over time, with some having  retired with millions worth of their companies’ stock in their bank accounts.

Why it matters: The rise of employee-owned businesses could be a win for both retiring  business owners without a clear succession plan and workers who see owning a small piece of a business as a lucrative earning opportunity in today's tough economic environment.

The idea already has a lot of support. A survey last year found six in 10 small business owners like the EOT model, and the Canadian Employee Ownership Coalition’s membership includes big names like BMO Commercial Bank and the Juno College of Technology.

What’s next: Major political parties signalled last year that they were open to the EOT idea, and the CEOC’s pressure could push them to act as the 2023 spring budget approaches.