For many companies, their success depends to a very great extent on having the right people doing the right jobs. Once you have found those key people, how do you retain and incentivise them for the long term?
Getting your reward structure right can give you a competitive advantage. How you tackle the challenge will depend on your current stage of development and your strategy for growth.
There is a lot of data suggesting that the right share scheme, which offers employees the opportunity to acquire shares in their employer company, incentivises employees to stick with the business and help make it a success.
There are several different schemes to consider, but the eligibility or otherwise of your company for one type of scheme or another isn’t usually the best place to start.
To begin with, you must ask yourself several key questions, and the most important of these is always “does the proposal make commercial sense?”
When it comes down to detail, you have a lot to decide. For instance:
- Will you gift the shares or require that employees pay full value for them?
- Are the selected employees really interested in the long-term future of the company or is cash reward their key motivation?
- Will your employees understand if you want to grow the value of the company so it can be sold?
- Will the employees be more interested in their own long-term job security?
- Do you know what your company is worth to a prospective new shareholder?
There are many issues to be resolved because for a scheme to work, employer and employee need to have goals that are broadly aligned. We can help you to resolve these issues.
What type of scheme?
Share schemes really come in two types – tax-advantaged and non-tax-advantaged. The tax-advantaged schemes are those that are specifically recognised by legislation, and therefore, enjoy a number of tax benefits like not paying income tax or national insurance on their value.
At TaxAssist Accountants, we can help you to work through the implications from each scheme so that you choose the one that is right for you.