Employee Benefit Trust
The Employee Benefit Trust
Why an Employee Benefit Trust (EBT)?
In 2004, the founding owners (and only shareholders) of SDC announced to the Board of Directors that they wished to retire in the next few years. This threw everybody into confusion – not least the owners themselves – about the future direction of the business. Following considerable discussions with the shareholders about how they could realise their investment, the concept of the Employee Benefit Trust (EBT) emerged – the first of its kind in the British construction industry. Sale to a third party and a management buy-out were initially considered, but the only option that enjoyed universal attraction was a Trust. The idea of the EBT was to create a situation where no private shareholders existed within the business, thus increasing stability and protecting the long-term future of staff.
How the EBT Works
Over a period of almost three years, between 2004 and 2007, the Trust acquired the entire issued share capital of SDC (Holdings) Ltd with a view to retaining control over the SDC Group on a long-term basis. This also led to the establishment of a new constitution for the Company, which states:
- The Trust has been set up for the benefit of its designated beneficiaries.
- A beneficiary is a person who is directly employed by the Company or a subsidiary.
- The purpose of the Trust is to promote an environment where all employees feel a sense of responsibility for the performance of the business, as well as a sense of pride in its achievements and results.
- The Trust’s primary requirement is to protect the future of the SDC Group and that it remains profitable at all times.
- The Trust will retain an element of the profits generated within the business to incrementally increase net worth each year, essentially protecting the financial strength of the Group, prior to the distribution of the remainder to designated beneficiaries.
Focusing specifically on how the profit distribution to staff works, an employee’s entitlement begins from the moment they join SDC. Everyone is awarded the same percentage, which usually fluctuates between 3 and 5%. Additional benefits include an improved pension contribution and more holiday entitlement based on years served.
The establishment of the Employee Benefit Trust means that there are no shareholders or owners. The Company owns itself. The Trust can acquire goods and property, or it can be a means to an end. In our case, it’s more of the latter. It acts as a framework for SDC to function. More importantly, the SDC culture was absolutely right for the foundation of the EBT. It wouldn’t have worked in a lot of companies. SDC has always been run like a family and the departing owners had a desire to leave it that way. They left feeling they had made a big gesture and had given the business to everyone.
Ethos the EBT Creates at SDC
The effect of the EBT has been to integrate the entire SDC staff as one unit working for the express benefit of the business. The sounds of ‘it's our business’, ‘we’re spending our money’ heard throughout the Company are a very real sign that the EBT is achieving its primary objectives, a business owned by, and for all, its employees.
Stability of the Business Under the EBT
Finally, there have been tangible benefits in the formation of the EBT for SDC’s clients, namely:
- No break up of the SDC business.
- Safeguarding the jobs of the employees.
- SDC not the subject of future buy-out, thereby creating more stability for the company long-term.
- Continuation of the SDC brand within the industry.
- Maintaining strong relationships with an extensive list of blue chip clients.
- The establishment of a Community Fund to help local causes and charities.