Is Employee Ownership a Good Business Model for Web Development Businesses?

Web development is big business in 2022, as more and more businesses move away from the high street and onto the internet. These days, web developers are more in demand than ever before, and, as lucrative as this industry is, we’re going to look at whether it’s right for the increasingly popular employee ownership model.

When we look at employee ownership trusts explained, we see that it’s a model whereby ‘ownership’ of a business is distributed among its workforce. This is usually done through an employee benefit trust, which allows employees to collect shares in the company. They can do this either by buying them, earning them, or being gifted them as part of a reward program.

These schemes are increasingly popular with businesses in the UK, following the example of companies like John Lewis who have been using the model for almost a century. In fact, there are around 1,557 web development companies in the UK serving businesses across the country. So, does it work for web development businesses? In this article, we explore this question…

Why Do Businesses Choose Employee Ownership?

There are a number of benefits to the employee ownership model - most specifically the fact that, when employees own a part of the company they work for, they tend to be more invested in the business. Therefore, they are usually more productive.

The model also benefits the company in other ways, such as raising capital in order to invest or expand the business more quickly than would otherwise be possible. 

For employees, this model is extremely attractive as it removes the idea that they are working for somebody else as they own a piece of the business, however small that piece may be.

Is Employee Ownership Right for Web Development Companies?

In most cases, employees of web development companies work to either a remote or hybrid work model. These businesses tend to lend themselves perfectly to employee ownership for a number of reasons, including: 

Accountability

With remote and hybrid models, it can at times be difficult to keep staff motivated and to make sure that they are putting in the necessary work. Employee ownership can help here by adding a layer of accountability whereby employees understand that the harder they work, the more money the company makes and, subsequently, the more their shares will be worth.

Staff turnover

The very nature of web development jobs means that staff turnover can often be high, as employees are poached or tempted away by other businesses. Employee ownership helps with staff retention by making employees feel more invested in the company and, therefore, they are likely to stay for longer. 

When you decide to expand, things can get a bit more complicated. Suddenly, your compliance workload doubles - unless you partner up with a global employer of record.

2021 was the year of The Great Resignation - followed by 2022 which has become known for the ‘Quiet Quit’, whereby employees remain in their positions but put in just enough work to prevent them from being fired. All of this means that it’s becoming more and more challenging for employers to retain great, hardworking talent.

As employees become ever more demanding, business owners need to offer more than just a salary and an annual bonus. Employee ownership is proven to be seen as an extremely valuable benefit by UK employees. 

Future-proofing

When employees become partners, they tend to be more willing to give input to the company. This increased engagement can help to tap into different perspectives, as the employees work together to make the company stronger and better for the future. 

Tax

The UK government offers a number of tax benefits to companies who choose to move to employee ownership, and these include: 

• Save As You Earn
• Share Incentive Plan
• Enterprise Management Incentives

These tax savings can be incredibly useful for small companies and can help them to more quickly scale their businesses.

Employee Ownership is a Win-Win for Web Development Companies

In many more traditional, old-school businesses, owners and stakeholders are often reluctant to change to new working models, simply because it’s something that they are not accustomed to. Businesses such as web development agencies, on the other hand, have the advantage of being younger, more modern companies that are more willing to embrace new ideas and ways of working. 

Changing to a different work model is something that should never be taken lightly. It’s fair to say that employee ownership is far from a ‘one size fits all’ solution. There are some industries that are simply not suited to such a model for various reasons - but web development isn’t one of them.

By their very nature, website development companies tend to be modern and forward-thinking, and this type of environment lends itself perfectly to the employee ownership model. 

Web development agencies also tend to employ young people who do not find traditional working models attractive, as older people perhaps would. Because of this, employee ownership appeals to the entrepreneurial nature of today’s talent. It also offers significant benefits for business owners and CEOs, making this a win-win solution for all concerned.

Photo by Christina Morillo