We’ve talked before on this blog about how important it is to find the right talent for your company. You need people who will be a good cultural fit and take an interest in your firm’s growth and performance, being motivated to contribute to your future successes. So, if you’re a small business in particular, you might consider offering shares or share options.
There’s a good reason for shares and share options being so often recommended by recruitment companies in Northern Ireland as a prospective employee incentive. They can help you to attract the best people without having to offer financially crippling salaries and bonuses. They also encourage your new employees to take a more active role in your company’s success.
Share plans may or may not be HMRC approved, and can be categorised in one of two ways. Both your company and employees can enjoy certain tax advantages when you opt for an approved scheme. That said, it tends to only be listed companies that use the Share Incentive Plan (SIP), the Save-As-You-Earn option scheme (SAYE) and the Company Share Option Plan (CSOP).
What about Enterprise Management Incentives (EMIs)?
EMIs, typically based around a company’s future sale, were specifically introduced by the government to make competing for top talent easier for small businesses.
An employee acquires shares under this plan and when they leave, they may pay barely 10 per cent tax from selling them. As a company, you may also be able to receive a corporate tax deduction on the gains made by the employee, of about 20 per cent. This combination amounts to a net tax repayment.
You may alternatively opt for an unapproved share plan, although only the company or the employee generally enjoy tax benefits from one of these. The employee is normally favoured, unsurprisingly. You can choose between share ownership and share options for such a plan, depending on your firm’s growth strategy.
Share options give an employee the right to buy a number of shares at a certain price in the future. They can therefore be a good choice if you intend to share or float the business in future. But if you want to better tie an employee into your business, making them a part-owner of the business via a share plan – which essentially means share ownership – is a better idea.
Shares and share options – good or bad for recruitment?
Sure, shares or share options aren’t an attractive incentive for every candidate. Some prefer the security of money in their bank now, rather than the mere hope of profits from shares in the future. However, are employees most interested in cash in hand the best to drive forward your business?
It’s an important question to consider for clients of recruitment companies across Northern Ireland.