Share the reward with your employees

Corporate and Commercial / 11 January 2018

We learned in the news this week that UK manufacturing output is at its highest for 10 years. On the back of this growth, some employers might be wondering how to reward their busy employees.

Of course, such a reward could be in the form of a bonus or a pay rise. But have you considered an employee share scheme? These schemes might sound complicated, but their impact, both in terms of advantageous tax treatment and employee motivation, can be substantial.

There are a number of schemes for businesses to consider, and the more usual ones for SMEs include Company Share Option Plans (CSOPs), Enterprise Management Incentive options (EMIs) and Share Incentive Plans (SIPs).

Which scheme is right for your business and your employees depends on several factors concerning the business, the employee(s) and what you are looking to achieve from the scheme. The bullet points below identify some headline considerations when looking at employee share schemes, as some:

  • require an initial financial commitment from the employee whilst others entitle employers to award free shares.
  • need to be rolled out to all (or most) employees whilst others can be awarded to selected individuals.
  • have a capped value and some restrict the value of options held by individuals.
  • are more flexible, giving employers greater control over the scheme’s rules.
  • can be linked to employee performance.
  • are criticised for attracting complicated tax reliefs and for being overly administrative.

Be aware:

  • Your business may not be eligible for every scheme. For example, the EMI scheme is only available to companies with gross assets of £30million or less, and which employ (the equivalent of) fewer than 250 full-time employees. Certain trades are also excluded from this scheme.
  • The employee(s) may not be eligible to participate in the scheme and an employee may have to hold the options for a certain period of time before even being eligible for tax benefits.

You should obtain professional tax advice to understand which scheme would be most appropriate for your business and your employees.

We are experienced in supporting businesses and can advise you in putting an employee option scheme into operation.

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