In today’s competitive business landscape, the quality and retention of great staff are crucial for success. Retaining top talent is challenging, and engaging them from the start is equally demanding. While ensuring general health, welfare, and flexible working conditions are essential, especially to mitigate flight risks among millennials, what more can you do to keep your key team in place?
Introducing Long-Term Incentive Plans (LTIPs), Enterprise Management Incentive (EMI) and Growth Shares – the ultimate incentive solutions for employee retention and engagement. LTIPs, EMIs and growth shares are designed to reward and motivate your key employees, aligning their interests with your company’s long-term goals.
What is a Long-Term Incentive Plan?
Our Long-Term Incentive Plans (LTIPs) are designed to strategically communicate your growth goals to your key employees, ensuring they are motivated and aligned with your vision. By offering performance-based rewards, LTIPs not only help in retaining top talent but also drive business growth.
An LTIP can be a powerful tool for businesses seeking to reward and retain key employees who make significant contributions to company growth. These plans focus on performance factors that drive business success, making them an investment rather than an expense. LTIPs are tailored to your company’s future vision, ensuring that the behaviours and results needed for growth are incentivised.
A Long-Term Incentive Plan scheme allows you to set up a plan that doesn’t dilute your ownership in the business but allows loyal and worthy staff to participate in its growth in value at a certain trigger point, either an actual sale or a specified date. This then helps encourage those key staff members to stay in post for a future payout.
This scheme is fabulous because you don’t have to worry about HMRC approval or complex shareholder agreements. It is quick, easy to set up, and most importantly, totally flexible and extremely cost-effective.
What is an Enterprise Management Incentive?
An Enterprise Management Incentive (EMI) is an alternative to an LTIP that is HMRC-approved and more tax-efficient. It is ideal for businesses seeking to incentivise key employees or employee groups.
An EMI Scheme enables a company to offer employees the opportunity to purchase shares at a fixed price determined at the time the option is granted. As the company’s value grows, employees benefit from the increase in share value above the original purchase price, making it a rewarding long-term incentive.
An EMI Scheme can only be offered if the company meets several legal requirements. The company must be independent, and at the time the share option is granted, the company must employ fewer than 250 full-time equivalent staff. Additionally, the scheme does not apply to businesses operating in financial services, legal services, or property development.
As there is no chargeable tax upon the grant of an EMI, this incentive option can be highly tax-efficient. EMIs are also easy to implement and can be used as an incentive in both the short and medium term.
Growth Shares
Growth shares offer senior employees the opportunity to acquire shares at a low initial cost, helping to minimise upfront expenses as well as income tax and National Insurance liabilities. Employees benefit only from the company’s value growth above a fixed threshold. This preserves the company’s value for shareholders.
Growth shares are most frequently used by private companies, particularly start-ups and those backed by private equity, with strong potential for significant growth.
The growth share’s structure is particularly advantageous when shareholders are planning an exit and other tax-efficient share schemes are not available. Another benefit of growth shares is that they can be made forfeitable upon employees’ exiting the business, with appropriate conditions in place regarding voting, dividends and transfer rights.
Growth shares can be combined with tax-advantaged EMI options, fusing their commercial and tax benefits.
The Benefits of Implementing a Long-Term Incentive Plan
There are many benefits to implementing incentive schemes in businesses, with a key driver being that they are designed to align employee performance with your company’s long-term goals. See other key benefits below:
- Retention of Key Talent: Keep your top performers engaged and committed to your company’s long-term success.
- Alignment with Business Goals: Ensure that your employees’ efforts are directly contributing to the growth and success of the business.
- Performance-Based Rewards: Incentives are paid out based on the additional value created, making them a smart investment.
- Enhanced Employee Engagement: When employees know that their efforts will be rewarded in the long term, they are more likely to be engaged and motivated to perform at their best.
- Attracting Top Talent: Top talent is often looking for opportunities where their contributions are recognised and rewarded, and incentive schemes provide a compelling reason for them to join your team.
- Tailored Plans: Whether it’s employee share schemes, performance-based bonuses, or share options, incentive schemes can be customised to fit your company’s unique requirements.
- Improved Company Performance: Employees are motivated to achieve the company’s long-term vision, resulting in sustained growth and success.
How fds Can Help
We will work with you to understand your business’s unique requirements and the key criteria and rewards you wish to apply to the incentive schemes. If you’re unsure which incentive scheme is best, we can help identify this and implement it accordingly. We specialise in creating tailored plans that are bespoke to your exact criteria, resulting in incentive schemes that focus on the company’s future performance.
If you’re ready to incentivise your key team and drive business growth, contact us today to discuss how we can help you implement an incentive scheme tailored to your needs.
