If you are looking to incentivise staff but cash is tight then another way to provide benefits and to make employees feel a part of the business is to grant them share options. The main advantage of doing this is that the employer can avoid making a pay rise but can still provide the employee with benefit and incentive by offering them an opportunity to obtain part ownership of the company. The options are normally granted subject to various conditions and more often than not can only be exercised if the employee remains with the company.
There are a number of share schemes that are currently being utilised, for incentivising senior employees who are involved in the management of the company employees can be offered an option to acquire shares under the Enterprise Management Incentive Share Scheme which is tax beneficial to the employee. There are also company share option schemes and unapproved share option schemes that may be considered.
The government is to introduce three new tax reliefs to encourage and promote indirect employee ownership. From April 2014, disposals of shares that result in a controlling interest in a company being held by an employee ownership trust will be relieved from capital gains tax; transfer of shares and other assets to employee ownership trusts will also be exempt from inheritance tax providing certain conditions are met and from October 2014 bonus payments made to employees of indirectly employee owned companies which are controlled by an employee ownership trust will be exempt from income tax up to an annual cap of £3,600. There will also be a package of tax simplifications for non tax advantaged (unapproved) employee share schemes taking effect during 2014.
So, if you are keen to retain and incentivise staff in the New Year then consider offering them an opportunity to be involved in the future success of the business by offering them share options. It can only encourage and make them feel more valued within the business.
If you would like any assistance or would like to discuss any of the above in more detail on a confidential and without obligation basis then please feel free to Umberto Vietri on (01535) 613674 or firstname.lastname@example.org.
Partner, Company Commercial