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. This is why choosing the right employee incentive scheme can transform business performance massively.
Two of the most popular options for a modern employee incentive scheme are Enterprise Management Incentive (EMI) schemes and growth shares.
Enterprise Management Incentive (EMI) Schemes for an Employee Incentive Scheme
- What they are: EMI schemes are government-backed, tax-efficient options for small and medium-sized enterprises (SMEs). Experts consider them the most tax-efficient way to offer incentives through a business.
- 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, their employee incentive schemes should allow them to share in the rewards.
- Key Features: EMI schemes have a 10-year lifespan, making them suitable for businesses with potential exit plans. These schemes require HMRC approval and limit eligibility to PAYE employees, representing the ideal employee incentive scheme for high-growth startups and scale-ups.
Growth Shares as a Flexible Employee Incentive Scheme
- What they are: Growth shares are a flexible alternative to EMI schemes, designed to reward future company growth.
- Purpose: The main reason to use growth shares is to offer a great reward system when standard EMI plans will not work for the business.
- Key Features: Growth shares are easy to change and customize. This lets companies set clear goals—like specific sales or profit targets—before giving them out. Growth shares are more flexible than EMI schemes because you can give them to anyone. They can also pay out regular dividends, giving people quicker cash rewards. However, if the business misses its goals, the people taking part will not get any money back.
