Share Schemes – a good incentive?

/ Business and Economy

Author: Henry Ejdelbaum

Tags: EMI, employee incentives, share schemes, SIP

Staff are expensive. Losing key staff members is even more expensive, with lost productivity and having to hire a replacement. How can you reduce the risk of key staff members running away to a competitor, especially if they have deeper pockets and a fancier office?

The good news is it doesn’t need to be a salary arms race. One way to incentivise staff in the long term is to offer shares as part of an employee share scheme. After all the possible benefits are increased loyalty, reduced staff turnover and a more motivated and productive workforce.

Share schemes are normally structured in such a way that the benefit only crystallises when certain performance targets have been met or a specified time period has lapsed. Employees who leave before these targets have been achieved lose out on the benefit, as the shares become more valuable the incentive to stay becomes greater.

Share schemes give staff ownership in the company, aligning their interests with that of the shareholders and the company, in turn motivating them to perform at their highest level in order to improve the performance of the company.

All very well but, how can receiving shares be better than receiving a salary? The HMRC offer a number of tax efficient employee share schemes, which are taxed less than receiving the equivalent amount in salary.

These are:
· Share Incentive Plans (SIPs)
· Company Share Option Plan
· Enterprise Management Incentives (EMIs)

Interested in finding out more? Why not pick up the phone and speak to an AIMS Accountant.

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