FAQs about Worker Cooperatives  

What is a Worker Cooperative?

Worker Cooperatives are a form of business ownership where the employees in a for-profit enterprise directly own and control the business on a democratic basis of "one person, one vote." 

Typically all workers, including management, are eligible to be worker-owners after working for a certain period of time and paying a membership fee.

In a worker cooperative, ownership and control of the business derive from working in the company, rather than from simply investing capital in it. A central element of this business structure is that labor uses (employs) capital, rather than capital using (employing) labor. The standard worker cooperative model prohibits non-workers from holding membership voting shares, thus retaining control of the firm within the workforce.

Profits and losses from the business are allocated to worker-owners according to either the hours worked or gross pay. Skill and seniority determine wage rates, which are often set by an equitable ratio between the highest and lowest paid worker-owners. 

How do you form a cooperative?

Whatever its social goals, a worker cooperative must first be a successful business. Just like any other business it must serve a viable market. There must be a clear demand for the goods or services produced and the cooperative must be able to deliver them at a reasonable cost. The workforce must possess the necessary skills to manufacture the products or deliver the service. In addition, the company will need competent management to lead it, and sufficient capital to finance its development costs, start-up and growth. 

ICA provides technical assistance to help worker cooperatives address all of these issues.

ICA recommends a three phase process for developing a new worker cooperative. First a feasibility study must be undertaken to determine if the initial business concept can become a viable worker cooperative. If the answer is "Yes" then a business plan showing how the cooperative will function, make a profit and repay its lenders must be prepared. In the final phase the business plan is used to raise the necessary financing, a manager is hired and the cooperative opens its doors for business.

What are the advantages of a worker cooperative?

The worker cooperative structure has many advantages, especially for a relatively small business serving a local market.