Rewarding and retaining staff is more important than ever. Beyond traditional salaries and wages, companies are exploring alternative ways to attract talent and motivate their teams.
Two of the most popular options are Enterprise Management Incentive (EMI) schemes and growth shares.
Enterprise Management Incentive (EMI) Schemes
- What they are: EMI schemes are government-backed, tax-efficient options for small and medium-sized enterprises (SMEs). They are considered the most tax-efficient way to offer incentives.
- Purpose: These schemes are designed to align the interests of employees with the business’s performance, potentially leading to significant financial rewards and improved cash flow management, especially for startups. The fundamental logic is that if employees create value, they should share in the rewards.
- Key Features: EMI schemes have a 10-year lifespan, making them suitable for businesses with potential exit plans. They require HMRC approval and can only be issued to PAYE employees. These schemes are ideal for startups and scale-ups with high-growth potential.
Growth Shares
- What they are: Growth shares are a flexible alternative to EMI schemes, designed to reward future company growth.
- Purpose: They are often used when EMI schemes are not a viable option.
- Key Features: Growth shares are highly customisable, allowing companies to set specific hurdles (e.g., turnover or profit targets) that trigger their allocation. Unlike EMI schemes, growth shares can be issued to anyone, providing greater flexibility. They can also be dividend-yielding, offering more immediate returns. However, there is a risk of no returns if targets are not met.
