Employees – How will you keep yours?

“People may take a job for more money, but they often leave it for more recognition.” – Dr. Bob Nelson, best-selling author and motivational speaker 

 Lots of companies have expressed concerns over losing key staff members after a tough 15 months. They know that their staff are their most valuable asset,  key to COVID recovery and a retention strategy should be in place to keep these key drivers of the business. However, many are at a loss finding their way out of the huge business changes that have occurred, cash flow has suffered, bonuses are not an option and concerns over future lockdowns still exist – do they just keep their fingers crossed and hope staff stay put? 

 Fortunately, there are other options which do not require a large cash outlay from the business or staff members. Wilson Partners has seen a rise in Enterprise Management Incentive schemes (“EMI schemes”). This is, a Government approved initiative under which key staff are offered options over company shares, in return for their hard work and loyalty. This fosters a deeper relationship between employee and employer – they both have detailed interest in the growth and success of the company – and encourages retention through future financial rewards. 

 A valuation is agreed with HMRC at the outset and staff will receive the shares at this value when they become exercisable, which will usually be on a company share sale. The result of this is staff should see an immediate increase in value on exercise, if for any reason the value has gone down, they can choose not to exercise the options. Furthermore, if a staff member leaves, they simply forfeit their options, protecting the business.  

 EMI schemes are the most tax efficient government backed incentivisation schemes for both the company and staff involved.  

The schemes also benefit from being very flexible in a number of different ways, as follows: 

• Options can be held over new or existing shares 
• The options can be linked to performance, years of service or a trigger event, such as a company sale 
• The shares over which options are held can have varied rights (for example non-voting, different share classes) 
• Multiple tranches of options can be made over any time period 
• Employees can also benefit from a 10% capital gains tax rate on the sale of the option shares. 

 Building and retaining a strong workforce is key to the future growth of companies. If you would like to speak to a member of the tax team about your business and whether an EMI scheme is right for you, please get in touch on 01628 770 770 or email [email protected] or [email protected]