The main reason companies run employee share schemes is to reward, retain and motivate key employees.
The Enterprise Management Incentive Scheme is a low-risk, tax-advantaged Share Option Scheme to reward employees over a longer period, allowing them to participate in the benefits of the growing value of your business without the necessity (and possible pitfalls) of them owning shares.
The Schemes’ benefits include helping to:
- Motivate participants to work beyond short-term goals
- Reward employees on a tax-advantaged basis. Entrepreneur Relief is available
- Protect owners/shareholders from dilution of ownership and loss of control
- Promote long-term retention of key employees
- Ensuring growth by linking rewards to performance
- Provide a framework to include new participants at any time
- Attract top candidates
Case Study 1
A local craft brewery needed to recruit a top salesperson to help them upscale the business with a three to five year plan to sell. The salesperson was recruited not by a bonus, but share options on 10% of the business. During the three years of the plan, the value increased from £500,000 to £5 million and on completion of the sale, the employee came away with £450,000, which was subject to 10% tax. Happy days for all involved!
Case Study 2
A manufacturing company employed a key works manager – who was very important to production. He was incentivised by being granted an option to buy 5% of the company when sold at the valuation price 5 years ago when the option was granted. The company and employee continue today, though there is now some talk of a retirement sale in the next 2 years.
If you would like more information on how Enterprise Management Incentive Scheme can help to grow your business and reward key employees along the way, please call us on 01384 376964
Folkes Worton – Accounting for the Future