New employee ownership model lands in Australia
15 July 2021 at 5:29 pm
Advocates believe Employee Ownership Trusts (EOT) could become a common sight across the country
Australian businesses are being encouraged to consider becoming employee owned by trust, after a Sydney design studio became the first local business to adopt the model.
Meld Studios has recently established an Employee Ownership Trust (EOT) – which holds a company’s equity on behalf of its employees.
Over time, Meld will transition equity (shares) from its three founders/owners to the EOT, giving every permanent employee indirect ownership of the company. This means employees have a direct say in the company’s direction and receive equal profit distribution.
Meld Studios co-founder Janna DeVylder told Pro Bono News the decision to establish an EOT was about ensuring the longevity of the organisation beyond the end of her involvement with the business.
DeVylder said she did not want to necessarily just pass on the business to her kids, and did not believe selling Meld to a larger company was a good cultural fit.
The founders decided on the EOT model because it was an equitable employee ownership structure that meant workers didn’t need to buy in and could come and go without ownership changing hands.
“So instead of having this dynamic of ‘come work for us. Earn the company money, you’ll get paid the salary’, what we set up means the effort we collectively put into this company will directly impact how much we grow and what kind of success we have,” DeVylder said.
“And because of that, we all reap the rewards of that collectively.”
Push for EOTs to become a viable model for Aussie businesses
Advocates believe this announcement could lead to the widespread adoption of EOTs by businesses across Australia.
In the UK, over 420 EOTs have been established since the model was introduced in 2014.
The model has been backed by federal Liberal MP Jason Falinski, who said Meld’s EOT was part of a global move to enhance the range of employee ownership structures available to small businesses.
“Our recent changes to the regulation of employee equity are specifically directed to our continuing promotion of employee ownership, which can result in significant benefits to the Australian economy and hard-working Australians,” Falinski said.
“We continue to believe that the promotion of employee ownership is a critical aspect of enhancing and developing worker engagement which has a mutual benefit for all.”
Employee Ownership Australia (EOA) chair Andrew Clements said there had been “significant interest from small businesses” around its work with EOTs.
“It is a model which is regarded as providing a very effective tool for employee ownership without the complexities of allocated employee share plans,” Clements said.
Clements helped adapt the EOT model for the Australian legislative and tax environment along with Graeme Nuttall OBE, a partner at the European law firm Fieldfisher who introduced the model in the UK.
Advocates are working to further develop this model in Australia, but note that existing tax rules are potentially an impediment to the broader rollout of EOTs across the country.
EOA is currently seeking the views of the Australian Taxation Office around the operation of EOTs in Australia.
New model brings fresh energy to Meld
DeVylder is also keen to see EOTs become more widespread in the business community.
She said building an environment in which employees have such an impact on the business can create a more connected and engaged employee base.
“This EOT [has brought] new energy, new possibilities and we’ve never been busier,” she said.
“It is certainly supporting people’s willingness and desire to really contribute to pushing what’s possible and really advocating for our mission.”
DeVylder said the company was now growing, having established studios in Perth and Canberra.
She added that being an EOT was quite appealing to people coming in as well, who knew they had the power to shape the business.
“It’s a difficult transition in terms of having to change my mindset, but also it’s such a freeing moment because I can now see all of these ‘Meldsters’ really stepping into this and coming up with ideas,” she said.