Many small businesses are turning towards Enterprise Management Incentive (EMI) Schemes as a way to incentivise key employees by granting options to allow them to acquire shares. So what are they and why could they benefit your business?
EMI Schemes give selected employees the right to buy company shares in the future at a fixed price through a share option. This can allow the company to retain more key employees by rewarding them for their hard work and dedication. As the shares are at a fixed price, employees could stand to make a significant capital gain when they choose to sell the shares.
Tailor-made agreements allow businesses to clarify which employees are eligible for the scheme, how many options they would like to grant and when those options can become shares. Businesses can also protect themselves by making it a condition of the scheme that when an employee leaves the company they automatically lose any options or shares that they hold.
There are many tax benefits to the schemes, especially for the employee, such as the reduced rate of capital gains tax and lack of income tax and national insurance payable on the value of the shares or options. The company can deduct the cost and setting up of the scheme against corporation tax; this allows the schemes to be set up cheaply.
However only certain companies can qualify for EMI Schemes- those businesses providing activities that have been excluded will be unable to participate. If the business does not qualify or EMI Schemes do not suit the business, there are plenty of other options available.