WORKER
CO-OPERATIVES
-
an introduction -
CONTENTS
- Co-operative
principles
- Reasons
to form a co-operative
- How
worker co-operatives are formed
- How
a worker co-operative is organised
- Different
origins of worker co-operatives
- How
a co-operative starts up in business
- How
a worker co-operative raises finance
- The
responsibilities of co-operative membership
- For
the interested individual
- Legal
format
- Employment
Rights in a Co-operative
- Development
Services
CO-OPERATIVE PRINCIPLES
There is no legal definition
of a 'co-operative'. A co-operative is a system based upon the philosophy of
equality, equity, and mutual self help. These principles of co-operation are
outlined in the "Statement of Co-operative Identity".
- Members experience a
share in ownership and control of the business.
- Conflict and strife are
minimised because workers and owners are one and the same.
- The stresses and responsibility
of ownership and control are shared.
- They frequently provide
a higher quality product or service due to increased motivation.
- They are usually more
ethical businesses due to the members' sense of responsibility to the community
and the environment.
- They are not footloose
and cannot be closed down at the whim of proprietors, who could, for example,
be other businesses at a great distance.
- Local people provide
local services and keep jobs and money in the local economy.
- As members are not "kept
in the dark" but share information about their enterprise, the co-operative
is a place where people learn a greater awareness of business, economics,
personal responsibility, etc. Co-ops encourage learning and personal growth.
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HOW
WORKER CO-OPERATIVES ARE FORMED
A group of people often
but not necessarily known to each other, come together to form a business owned
and controlled by themselves. They may have particular skills - similar or complementary;
they may be unemployed or threatened with redundancy; they do not necessarily
need to already have all the skills, experience or finance necessary for the
success of the enterprise.
Often the idea crops up
in a tea break, in conversation over the shopping, or over a pint at the local.
These ideas are sometimes lost because the next step is not clear. One of the
uses of your local co-operative development agency (CDA) is to have someone
to talk to about this.
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HOW
A WORKER CO-OPERATIVE IS ORGANISED
Experience in Britain
and other European countries has shown that the following conditions are vital
for success
- COMMITMENT
It is essential for a high proportion of members to be committed to the long
term success of the co-operative. As many employees as possible should be
members of the co-operative.
- CONTROL
Control over policy decisions must be made upon the basic co-operative democratic
principle of one member, one vote. Good communication is essential, and members
should be kept fully informed at all times. They should participate constructively
at regular meetings.
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DIFFERENT
ORIGINS OF WORKER CO-OPERATIVES
No two worker co-operatives
are the same, but amongst the great variety of organisations, the following
can be distinguished:-
- NEW START
Most co-operatives are brand new enterprises which are set up to cater for
an identified niche in the marketplace. The motivation comes from the members'
commitment to co-operative principles, and their desire for mutual self-help.
- CONVERSION
Some well-established traditional companies have been converted into co-operatives
because the proprietors wish to pass over or sell ownership to the workforce.
This is often a far better solution to the need for a strategy for exit or
retirement than liquidation or sale to a competitor
- RESCUE
Workers are frequently driven to attempt to defend their jobs by forming a
co-operative to continue a business that has failed for some reason. To have
a good chance of success a rescue co-operative must be able to identify the
reason for failure and be sure that it has the solution.
- PHOENIX
It is sometimes possible to create a new business out of the ashes of an old
failed one. The commitment of a highly motivated workforce is a resource that
should not be lightly squandered. Often parts of a business which has collapsed
are in themselves viable but are dragged under by the rest.
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HOW A CO-OPERATIVE STARTS
UP IN BUSINESS
Firstly the group does a
"feasibility study". This can be formally undertaken by the members, or professional
help can be enlisted. The feasibility study simply checks out whether the business
idea is likely to be commercially successful, and when completed, will form
the basis of a business plan.
Producing the business plan
will generate commitment within the group, and every organisation approached
for help will need to be convinced by it.
It is very important that
the cost of the setting up is analysed very early on. Below are detailed the
areas to be investigated and budgeted for in the business plan.
Start up costs for a co-operative
to be considered in relation to the Business Plan:- (a new group should itemise
its needs under each category)
PREMISES
- Property, building, land
- Repairs, alterations
or extensions to the fabric
- Flooring
- Lighting
- Heating and insulation
- Decoration
- Security
EQUIPMENT
- Machines
- Tools
- Shelving and storage
facilities
- Utensils
- Furniture
- Display facilities
- Cash register, safe or
strong box
OFFICE
- Equipment (typewriter,
photocopier, filing cabinets etc.)
- Furniture (desk, chairs,
carpets, etc.)
- Telephone installation
- Stationery
- Office records system,
e.g. books for financial control Sundries - pens, files, etc.
PRODUCT DEVELOPMENT
- Research
- Design and development
- Prototype manufacture
- Registering patents and
copyrights
MARKETING
- Market research
- Publicity material
- Stationery
- Advertising
- Presentations and displays
- Trade Fairs
WORKING CAPITAL
- Opening stocks
- Spare parts
- Credit sales
TRANSPORT
- Vehicles
- Road Tax
- Insurance
STAFF COSTS
- Wages
- Employers National Insurance
- Pensions
- Expenses
OFFICE COSTS
- Telephone
- Postage
- Stationery
OTHER
- Legal advice and registration
- Accountancy and financial
advice
- Training expenses
- Insurances
Before a co-operative can
begin trading it is necessary to assess your sources of finance. Think about
obtaining credit facilities, especially for purchasing stock. If not a short
term loan or overdraft facility could be obtained.
Longer term loans or investment
will be required to provide for capital items such as improvements to premises,
machinery and fixtures & fittings.
Clearly the amount of money
you need will be dependent on the timing of all the outgoings and when you receive
income. The technical term for this is cash flow. Cash flow projections need
to be generated for at least the first three years.
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HOW A WORKER CO-OPERATIVE
RAISES FINANCE
Worker Co-operatives generally
raise their finance from a combination of the following sources:-
- Members own resources.
What each member can contribute from savings or borrowings is one important
way of raising money. Other lenders will be reassured if co-operative members
have a personal stake at risk too. It is very important that proper loan agreements
are drawn up between members and the co-op. See your CDA about this.
- Friends, relatives, community
groups, churches, trade unions and other sympathisers may be able to provide
loans or act as guarantors.
- Banks. It is worth approaching
the local manager of any of the High Street banks for a loan. They are becoming
increasingly used to worker co-operatives.
- Co-operative & Community
Finance is an organisation specifically set up to provide finance to co-ops.
It also provides help with monitoring and improving financial performance.
Contact through your CDA.
- Special lenders. There
may well be some ethical investment organisation which would be prepared to
support your particular venture. Ask your CDA.
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THE
RESPONSIBILITIES OF CO-OPERATIVE MEMBERSHIP
A co-operative is not a
soft option. No-one should join a co-operative as a passenger. They must be
prepared to take responsibility and to participate fully.
Like many of the better
things in life, co-operation requires dedication, commitment, and hard work,
if the potential to enrich the quality of life in the workplace is to be achieved.
When starting a co-operative
people obviously have a number of hopes and reservations about the step they
are contemplating. For example -
HOPES
- Workers' control over
business
- Responsibility
- Ethical ideas being put
into practice
- Turning a viable hobby
into long-term employment
- Job satisfaction
- No hierarchy
- Skill sharing/role swapping/learning
new skills
- Wider community co-operation
- Support from other members
during setbacks
FEARS
- Finances
- Of failure
- Personal decision making
- Conflict between commercial
and social ideals
- Lack of commitment and
motivation
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FOR
THE INTERESTED INDIVIDUAL
If you have an interest
in becoming a member of a co-operative and wish to locate your potential co-operators
you should consider the following options:-
- Through your local Co-operative
Development Agency. They have a skills register for potential co-operators.
- Advertising in local
Job Centre or Unemployed Workers' Centre.
- Advertising in local
papers.
- Taking note of "Employment
wanted" notices in local papers.
- Social links - friends,
colleagues.
It is a good idea for the
group to share information about their personal hopes and fears about the venture
as each will have different views to air. Each individual can write down a list
of what they can offer the co-operative and what they expect from the co-operative.
e.g.
“What can I offer?”
- Skills and Experience
- Technical
- Administrative
- Practical
- Resources
- Money
- Equipment
- Premises
“What I want from the
Co-op”
- Pay (min/max)
- Hours (min/max)
- Type of work
- Involvement in decision
making
- Long-term aims
- Conditions at work
- Social aims of the co-operative
Once each member has this,
the information on each list should be compared to identify the areas of common
ground, and also areas where differences exist.
It is important to deal
with these issues and differences at an early stage so they can be sorted out.
It is important to do this before the co-operative gets off the ground because
there will be less time when the business is running.
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LEGAL
FORMAT
A co-operative can be established
as a partnership. There are model partnership agreements which can be used to
ensure that the partnership is established on a fair and co-operative basis
with the rights and responsibilities of each partner clearly defined.
Most co-operatives are established
as companies limited by guarantee. This legal format allows for limited liability
for the members, democratic management structures, and for a mixture of commercial
and social objectives. There is a range of model Memoranda and Articles of Association
to reflect the precise needs of individual co-operatives.
Larger co-operatives can
register as Industrial and Provident Societies. This also allows for limited
liability.
Advice on the appropriate
legal format to use and a full registration service is available through your
CDA.
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EMPLOYMENT
RIGHTS IN A CO-OPERATIVE
Co-operatives employ their
members directly and a co-op member has all the rights that any other employee
might have - the right to a contract of employment; full Trade Union rights;
the right to use the Industrial Tribunal system, etc; plus the right to bring
up any issue that might arise at a co operative meeting.
Pay is received in return
for performance of the contract of employment, not as director's drawings. No-one
can suggest that it should be returned in the event of commercial failure. It
is paid through the PAYE system, with tax and National Insurance dealt with
on that basis. No tax liability is built up. In the event of the business not
sustaining itself, members can be made redundant and have the right to redundancy
pay and immediate access to unemployment and social security benefits.
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