The ongoing retirement surge among baby boomers and the recent push to invest in Canada are creating the perfect conditions for the country to further explore employee ownership trusts and make permanent the relevant legislation, says Elspeth Murray, director of the centre for entrepreneurship, innovation and social impact at Queen’s University’s Smith School of Business.
The school recently launched an employee ownership research initiative to develop a Canadian-made approach to policies and programs that support employee-owned businesses. In 2024, the federal government introduced a temporary tax exemption for up to $10 million in capital gains from the sale of an EOT, but it has yet to announce permanent legislation.
Read: Employee ownership trusts taking shape in Canada
“There’s lots of data on employee ownership and its benefits to employees and businesses in the U.K. and the U.S., but there’s not a lot of data in Canada,” says Murray. “A lot of owner operators are not really aware of the option for selling businesses to employees.”
For employees, EOTs provide the added financial benefit of profit distribution in addition to their regular paycheque. In jurisdictions such as the U.K. and U.S., these arrangements have been largely successful for all parties involved, says Murray.
“They’re enormously successful for the owner operators because of the tax advantage, but they’re successful for employees too. Employee-owned companies outperform business-wise and so that directly benefits employees through the profit sharing that comes via the EOTs.”
Read: Feds should make capital gains tax exemption permanent for employee ownership trusts: report
Research has found there’s also a positive psychological impact for workers in an EOT. “Employee-owned businesses are also often much more fun places to work — it changes your mental model. It’s not just punching the clock [and] there’s this sort of psychological ownership which makes you happier and more fulfilled.”
And with calls for increased domestic investments — as well as the ‘Buy Canadian’ movement — gaining steam amid threats of tariffs and annexation by the U.S., EOTs offer Canadian businesses a way of keeping ownership within the country.
“If we want to keep businesses Canadian-owned and located in the communities in which they have built and operate in . . . we need this [legislation] to be extended permanently,” says Murray.