Significant alterations sweeping through UK's leading toy store, impacting all 1,900 employees.
The Entertainer, a well-known British toy chain, has announced that it is transitioning to employee ownership, making it one of the latest retailers to join this growing trend in the UK. Co-founder Gary Grant and his wife Catherine, who founded the company 44 years ago in Amersham, Buckinghamshire, will transfer at least 50% of their shares to an employee ownership trust.
This move will enable around 1,900 employees to receive a share of the company's profits and participate in decision-making through an advisory board. The transition process is expected to be completed by September 2025.
The Process of Transitioning to an Employee Ownership Trust (EOT)
The process of transitioning a company to an EOT involves selling the majority ownership of the company's shares to a trust that holds them on behalf of employees. The Entertainer's co-founder, Gary Grant, will transfer 100% ownership into an EOT.
Other retailers that have made the transition to employee ownership include TV and hi-fi retail chain Richer Sounds, which transferred shares into a trust six years ago, and outdoor activities group Go Ape, which over 1,000 staff share in any surplus profits after handing over ownership in 2022.
Benefits of Transitioning to an EOT
The benefits of this transition for both employees and the company are significant. Employees gain an indirect ownership stake and share in profits, with profit-share bonuses potentially tax-free every year if certain conditions are met. This financial participation fosters a sense of inclusion, respect for employee opinions, and motivation to contribute to business success.
Moreover, job security and business continuity are improved, as EOTs reduce uncertainty following ownership changes and provide stable succession planning. The Entertainer aims to maintain its "family feel" through this transition.
There are also tax advantages for shareholders who sell a controlling stake in their business to an EOT, with a 0% capital gains tax rate potentially applying. Companies can offer tax-free bonuses to employees, enhancing the financial appeal of the structure.
Saving the High Street
The Employee Ownership Association has commented on the trend of retailers moving to employee ownership, suggesting it could help save the high street. James de la Vingne, chief executive of the Employee Ownership Association, has stated that it's exciting when a major high street brand becomes employee-owned.
The UK's John Lewis Partnership, with around 70,000 staff, is the biggest employee-owned company in the UK. The Entertainer runs 160 shops and 1,000 concessions across the UK, making it a significant player in the high street retail sector.
In conclusion, The Entertainer's example illustrates how transitioning to an EOT can secure legacy, engage employees financially and culturally, and offer tax-efficient succession for business owners in the UK. This move is not only beneficial for the company and its employees but could also contribute to the revitalisation of the high street.
Employees of The Entertainer will now participate in decision-making and share in the company's profits through an advisory board, as a result of the company's transition to employee ownership. By transitioning to an Employee Ownership Trust (EOT), the company hopes to improve job security, business continuity, and potentially save the high street.
The financial benefits for employees include the possibility of receiving tax-free profit-share bonuses annually, promoting a sense of inclusion, respect for employee opinions, and motivation to contribute to business success. This transition also offers tax advantages for shareholders, as a 0% capital gains tax rate may apply when selling a controlling stake in the business to an EOT.
