Becoming a millionaire grocery clerk, having real retirement savings, and working for a tax-free company…
What if your employer could sell you a percentage of their company?
What if you paid NOTHING for the shares, but now had real retirement funds?
And what if the company became more productive and was exempt from federal and state tax on profits? This is all possible through Employee Ownership.
Specifically, this is through an ESOP, or an “Employee Stock Ownership Plan.” In 1974, the Federal Government created a program that allows owners of businesses to sell some or all of their company to their employees.
The employees pay nothing. Rather, the business takes on a note (a “mortgage”) that gets paid back over three to five years.
The owner gets paid full fair market value, and now the employees have a real stake in the company and real retirement savings. Not surprisingly, employee owned companies are much more productive than non-employee owned companies and turnover rates decrease dramatically.
And here’s the best part…an ESOP company’s profits are tax free – forever. The tax savings pay off the mortgage! And very few people know about this.
Pennsylvania has about 300 ESOPs including Sheetz, Dansko Shoes, and Title Alliance Ltd. Read what their CEOs have to say here.
At age 19 Cathy Burch took a job at WinCo, a supermarket chain and ESOP company. She worked in various roles – cashier, shelf stocker, inventory orderer, and by the time she was 42 she was a millionaire. And at WinCo, her story is not unique. Read more about the millionaire grocery clerks here.
Types of Employee Ownership
There are many vehicles that can put a financial stake into employee’s hands, ranging from stock options, to purchase plans, to phantom stock. Each vehicle has its own unique mix of features, including tax treatment, accounting rules, and motivational impact. We focus on two main forms: ESOPs and Worker Cooperatives.
To learn more, reach out to Rosalie Evans (rosalie@paceo.org) at the nonprofit Pennsylvania Center for Employee Ownership, and visit us at ownershippennsylvania.org.