Employee profit-sharing in not-for-profits using the employee ownership trust to facilitate employees sharing part of not-for-profit organisations’ surpluses

A ‘not-for-profit organisation’ is a broad term for all independent organisations whose purpose is something other than to make private profit for members. Nevertheless, paying a workforce is permitted. Much of the good work of not-for-profits would otherwise be impossible. A growing body of research shows employee ownership has wide-ranging benefits including delivering on an organisation’s objectives. This and other evidence suggest regulators and trade bodies should endorse employee ownership of not-for-profits, to enhance their social outcomes, and as part of this to support all-employee surplus sharing consistent with employee ownership good practice. Concerns that having surplus-sharing in a not-for-profit model may detract from its social purpose, are allayed by EOT ownership. The fiduciary duties on the trustee of the EOT will ensure fairness and proportionality in the use of surpluses between social purpose and incentivising and rewarding a workforce. The EOT model is even more straightforward to implement in not-for-profits, than when used as a business succession solution, meaning ease of adoption.