Want to Reward Your Team For Their Dedication During Covid-19? Consider An Employee Share Scheme

One of the most powerful trends to emerge from the Coronavirus crisis is the way it has changed – perhaps permanently – our attitude to working life.

Many employees will be questioning the way they spend their working day, their expectations when it comes to a work-life balance, and their relationship with their employer.

Of course, employers too will be re-assessing their approach to their workforce. They may be examining their business model in order to re-invigorate and future-proof their company, too.

An employee ownership share scheme is a smart way of rewarding staff for their loyalty and hard work – and it can give them a real sense of buy-in as well as a vested interest in the continued success of the firm.

What is an Employee Share Scheme?

Just as it sounds, an Employee Share Scheme is an arrangement that gives some or all of your employees an interest in the shares of the company.  This could be via a direct share purchase, the grant of options, or a free share.

Which schemes are simplest to put in place? 

The enterprise management incentive (EMI) plan is particularly popular. It is a tax efficient option, it is simple to implement and easy to understand for the employer and for any option-holders.  Most small companies will qualify for this scheme, but not all, so it is important to seek detailed advice on this.

What happens If the option-holder leaves the firm?

One of the advantages of EMI is that it is easy to dismantle if the option-holder leaves. The option-holder has no financial or tax commitment if the option is never exercised.

Can I give each employees an interest in the business?

Yes. A share incentive plan is a good option for this model, or a block of shares can be put into an employee benefit trust.

Can you offer share incentives to non-employees?

Yes.  A direct share subscription, or options, would work for this scenario and they are often offered to non-executives.

What are the risks to employee share schemes?

Like any re-modelling exercise there are risks, but an experienced professional can guide you so you get the best out of whichever scheme you choose. If a scheme isn’t implemented carefully, or if employees are not well briefed on the details of the scheme, and how and when they would benefit, this can be demotivating for them. In the vast majority of cases, these schemes are very positive and are well received by staff. But clear communication is key.

What Does HMRC Need to Know?

You should tell HMRC about a new Employee Share Scheme by 6 July after the end of the tax year in which you created it.  Notification of an EMI option must be given within 92 days.  There will be some form-filling required by HMRC, but, again, a professional can guide you through this. It is important to design a share scheme that helps you achieve your commercial goals, and tax efficiency can be a consideration in this.

Remember that no two companies are the same. They will all have different priorities, objectives and a different ethos. So, this is not a one-size-fits all scenario. However, an experienced professional can talk you through the smartest option for you, your business, and your workforce.

Contact us today so we can give you the help you need.

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