An original TeaLamp explainer based on the sources listed below. Prepared by the TeaLamp Editorial Team with the help of AI.
When a business owner decides to retire, the usual ending is a sale to a rival, a private equity firm, or a stranger with a chequebook. But a growing number of owners are choosing a different buyer: the people who already work there. Employee-owned companies are still a small corner of the economy, yet the numbers are striking, and the research behind them is surprisingly kind to the idea.
Key takeaways on employee-owned companies
- In the United States, about 6,600 employee stock ownership plans cover 15.1 million participants and hold more than 2.1 trillion dollars in assets.
- In the United Kingdom, the number of employee-owned businesses grew from 135 in 2014 to about 2,470 by mid-2025, employing around 358,000 people.
- Research covering the recessions of 2001 and 2008 found that employee-owned firms cut far fewer jobs than other firms, and were more likely to stay in business.
- Employee-owned businesses in Britain are between 8 and 12 percent more productive than comparable firms, according to research for the Employee Ownership Association.
- The model is not magic: conversions slowed sharply in Britain in 2025 after a tax break was cut, and employee-owned firms still face layoffs, just smaller ones.
What employee ownership actually means
Employee ownership comes in a few shapes, and the name matters less than the idea: the people who work in a business also own a piece of it. In the United States the most common form is the ESOP, an employee stock ownership plan. The company sets up a trust that buys shares on the workers’ behalf, usually with borrowed money that the company repays over time. Workers do not usually pay for their shares out of their own pockets. The shares build up in their retirement accounts and are paid out when they leave or retire.
In Britain the favourite form is the employee ownership trust, or EOT. It was introduced in 2014, and it works much like the American ESOP: a trust holds a controlling stake for the benefit of all employees. There are also worker cooperatives, where each worker is a member with one vote, and the business is run democratically. The John Lewis Partnership, the British retailer behind John Lewis and Waitrose, is the famous early example: its founder, John Spedan Lewis, signed the business over to a trust for its employees in 1929, and the company still runs that way today, with around 74,000 people called Partners.
Whatever the legal shape, the point is the same. Ownership is spread across the workforce instead of sitting with one family, a handful of investors, or a distant parent company. Workers get a share of the profits, and in many setups a say in how the place is run.
The numbers behind the quiet boom
The American figures come from the National Center for Employee Ownership, using the latest federal filings. As of 2026, using 2023 data, there are 6,609 employee stock ownership plans at 6,411 companies in the United States, covering 15.1 million participants, of whom about 11 million are active employees. The plans hold more than 2.1 trillion dollars in assets. The number of plans has drifted down a little since 2015, but the number of people in them has grown, which means the average plan is bigger than it used to be.
Britain’s growth has been faster and more recent. The Employee Ownership Association counts about 2,470 employee-owned businesses in mid-2025, up from just 135 in 2014. Together they employ around 358,000 people. In 2024 alone, about 560 businesses moved into employee ownership, and construction firms have become the fastest-growing part of the sector. Professional services, the largest slice, make up about 28 percent of employee-owned businesses.
The British boom has a clear trigger. When the employee ownership trust was introduced in 2014, the government offered a generous tax break: an owner who sold a controlling stake to a trust paid no capital gains tax at all. That made selling to the staff the cheapest exit as well as the kindest one. It is a good example of a small policy change steering a whole market.

Ownership changing hands, one share at a time. Image generated by AI.
Why owners are selling to their staff
The most common reason is simple: the owner wants to retire, and there is nobody obvious to take over. A generation of business founders is reaching retirement age, and many of them built companies their children do not want to run. Selling to a competitor can mean layoffs, a moved head office, or a name disappearing from the high street. Selling to the staff keeps the jobs, the customers, and the culture where they are.
There is also a practical pull. A trade buyer wants a bargain, and a private equity buyer wants a quick return. An employee trust buys at a fair, independently valued price, and pays for it out of the company’s future profits. The owner gets paid, the staff get a stake, and the business carries on without a new boss from outside.
For the workers, the attraction is a share of the value they help to create. An employee ownership trust does not make anyone rich overnight. The shares build up slowly, and their value depends on the business doing well. But it is a real asset, and it comes with something money cannot buy: a reason to care about the place beyond the monthly pay cheque.

The local business stays local when the staff own it. Image generated by AI.
Do employee-owned companies actually do better?
This is where the story gets interesting, because the evidence is stronger than most people expect. The best-known study, by Fidan Ana Kurtulus of the University of Massachusetts Amherst and Douglas Kruse of Rutgers University, looked at every publicly traded American firm from 1999 to 2011, covering the recessions of 2001 and 2008. When the unemployment rate rose by one percentage point, employment at firms with broad-based employee ownership fell by 1.3 percent, against 3 percent at firms without it. Employee-owned firms were also more than 21 percent more likely to stay in business.
The pandemic told a similar story. A study by Rutgers University and the Employee Ownership Foundation found that companies majority-owned by an employee stock ownership plan were three to four times more likely to keep their workers in 2020 than other companies, and far less likely to cut pay or hours. A separate study of the food industry by the National Center for Employee Ownership found that employee-owned food companies laid off a median of 2 percent of their workers in 2020, against 5 percent at comparable firms, and lost far fewer people to quitting: a 6 percent quit rate against 20 percent.
The newest numbers point the same way. A 2026 survey by the National Center for Employee Ownership found an average voluntary quit rate of 11 percent at employee-owned companies, against a 26 percent average for American companies as a whole, and a layoff rate of 7 percent against 15 percent. And research commissioned by the Employee Ownership Association found that employee-owned businesses are between 8 and 12 percent more productive than other firms, and invest more in their people and their communities.
None of this proves that ownership alone does the work. Employee-owned firms also tend to share information openly, train their staff, and involve workers in decisions, and those habits may matter as much as the shares. But the pattern is consistent across countries, industries, and decades: give workers a stake, and the business holds together better when times get hard.
The catch: it is not magic
Employee ownership has real limits, and the last year has shown two of them. First, the British boom depended on a tax break, and when the government cut it, the boom slowed. In the 2025 Budget, the capital gains tax exemption for selling to an employee ownership trust was cut from 100 percent to 50 percent. Sales to trusts fell from about 550 in 2024 to an expected 350 in 2025. The model still works, but it is no longer the obvious cheapest exit, and the pace of new conversions has dropped by more than a third.
Second, employee ownership does not prevent hard times. A recent Harvard Business School study of layoff notices from 2008 to 2025 found that employee-owned firms actually announced layoffs more often than other firms, though the cuts were smaller each time, affecting a smaller share of the workforce. The honest reading is not that these firms never cut jobs, but that they cut in smaller slices and keep more people overall.
There are other costs too. Setting up a trust or a stock ownership plan needs lawyers, valuers, and a loan, which is a lot for a small business. Workers do not control the company the way a cooperative member might, and in many trusts they cannot sell their shares. And if the business struggles, the workers’ retirement savings fall with it, which is a risk that a plain pension does not carry.
Why it matters
Employee ownership will not replace ordinary business, and it should not try to. It suits some companies and not others, and it works best where the staff already know the business inside out. But it answers a question that is getting louder: when a good business has no heir, who should inherit it? The quiet rise of the last decade suggests that, more and more often, the answer is the people who built it. That is a small change in who owns things, and a large change in what ownership means.
Related reading
For another experiment in how work could be organised differently, see our explainer on The Four-Day Week: What the Trials Actually Found.
Frequently asked questions
What is an ESOP?
An ESOP is an employee stock ownership plan, a trust that holds shares in a company for its workers. The trust usually borrows money to buy the shares, and the company repays the loan over time. Workers build up shares in a retirement account and receive their value when they leave or retire.
Do employees have to pay for their shares?
Usually not. In an American ESOP and a British employee ownership trust, the shares are bought by the trust and allocated to workers as a benefit, not bought out of their pay. In a worker cooperative, members typically buy a small membership share instead.
Can any business become employee-owned?
Most can, but it suits some better than others. It works best for stable, profitable businesses with a workforce that wants to stay, and where the owner is ready to step back gradually. It is harder for very small firms, because of the setup costs, and for businesses that need large amounts of outside investment.
Sources
- National Center for Employee Ownership, “What Is an ESOP?” (6,609 ESOPs at 6,411 companies, 15.1 million participants, over $2.1 trillion in assets, 2023 data).
- Personnel Today, “Employee ownership figures show surge in last decade” (2,470 businesses, 358,000 people, 560 transitions in 2024; June 2025).
- Harvard Business School, Institute for Business in Global Society, “Employee-owned companies tend to weather economic downturns” (Kurtulus and Kruse findings; Rutgers pandemic study).
- National Center for Employee Ownership, “New NCEO Research Shows the Benefits of Being an ESOP in the Food Industry” (2020 layoffs 2% vs 5%; quits 6% vs 20%).
- National Center for Employee Ownership, “UK to Decrease Tax Incentive for Sales to Employee Ownership Trusts” (CGT exemption cut from 100% to 50% in the 2025 Budget).

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