Share incentives for key employees

Staff retention and motivation is crucial to the success of any business.  In addition to the payment of salaries and bonuses, business owners should consider the benefits of rewarding key employees with share incentives.  These are usually given by either an outright award of shares to an employee or the granting of options to acquire shares at a future time, often dependent on company and/or individual performance.

Some share option schemes are HMRC approved whilst others are not.  The main difference being that approved schemes tend to be more tax advantageous than unapproved schemes which remain perfectly acceptable. Once an individual has a shareholding, tax efficiencies can become available whereby profits resulting from the sale of certain shareholdings are taxed at just 10% and dividends can be paid to shareholders.  Please note that where an individual receives shares at a discount in their employing company, income tax charges normally arise on the discount so advice is required to ensure that the value of shares is considered properly.  Share values may be lower now than in future as businesses enjoy the economic recovery so now may be a good time to issue share incentives.

Business owners often resist dilution of their shareholdings, but key employees can enhance the value of the business for all parties and share incentives allow them to share in the value of growth generated by their work.  Business owners need to consider whether they will be better off holding a smaller percentage in a business that is worth more as a result of a highly motivated team of key staff.

We can offer all kinds of advice regarding share incentives, employee retention and reward generally and are happy to discuss what kind of rewards would suit your business and key employees.  Business owners who have never properly explored the benefits of share incentives for their business may wish to do so to ensure that they are not missing out.