Although the Coronavirus Job Retention Scheme has been extended to 31 October 2020, businesses would be well advised to shift their focus to what their workforce and their terms of employment might look like following a return to more normal working patterns.
Whilst redundancies and salary cuts will be inevitable in most businesses, thought should also be given to how to retain and incentivise employees while demonstrating appreciation for their continued loyalty.
In the current economic climate, where it may not be possible to incentivise employees with salary increases and bonus packages, offering employees equity in the business is an effective incentivisation.
Now more than ever in recent years, retaining and incentivising high calibre employees will be key to a business’ recovery and growth in the COVID-19 era.
Share schemes attract, motivate and help to retain talent by offering employees the chance to acquire shares in their company. They align employees’ interests with those of the shareholders, encouraging employees, particularly senior managers, to think like owners. They are also cost effective from the business’ perspective.
You may be concerned about the complications of minority employee shareholders. To circumvent this, we frequently advise our clients on the use of “exit only benefit” schemes. In such schemes, employees do not immediately become shareholders and have no voting or other rights, but simply take a share of the proceeds of sale on an exit by way of sale or initial public offering.
Share schemes are divided into tax-advantaged share schemes and non-tax-advantaged share schemes. Within each category share schemes can take many forms, each with various benefits depending on your objective.
Figures from the Office for National Statistics demonstrate the popularity of share schemes by showing that the number of companies operating one or more tax-advantaged share schemes almost tripled between 2000/01 to 2017/18 from 5,160 to 13,330.
How Laytons LLP can help
Our experts can help you to design and deliver the appropriate incentivisation package, tailored to your precise objectives.
It is vital that employees properly understand the value of the incentive structure in place and we can also assist with effective communication to employees.
