What are the options for incentivising key members of your team?

08 March 2023


Expansion & Improvement

As a business owner, your team is one of your most valuable resources, which is why keeping them motivated can make or break your success. Motivated employees are more productive, more creative and more likely to stay with your company, developing their skills and passing them on as you scale. While money is an important – and necessary – factor in motivating employees, it is not the only way.

Kapil Davda explains the various options available for incentivising your most important team members, the ways they can serve your business and how to use them to get the most out of your people.


What options are available to incentivise your team?

In today’s competitive employment market, employees have more choice than ever when it comes to roles. At the same time, working habits, motivations and goals are also changing – not everyone is just looking for a higher salary or the standard benefit package.

While this complicates the process of creating your employee experience, it also gives small businesses more flexibility when it comes to attracting top talent beyond the salary-arms race. 


Equity and aligning incentives

One of the most powerful ways to incentivise employees, both at the start of your business and at the point of passing it on is to give them a direct stake in its success.

In doing so, it aligns their interests with the company's success and creates a win-win when it comes to their work. The UK has a very efficient way of giving shares through the Enterprise Management Investment (EMI) scheme. This scheme doesn't cost the company anything until there is a liquidity event and offers very attractive tax advantages for employees.

Designed to help SMEs attract and retain key employees, EMI schemes must fit certain criteria such as:

  • The company must have gross assets of no more than £30 million.
  • The company must have fewer than 250 employees.
  • The company can’t be a subsidiary or externally controlled.
  • The company must carry out a qualifying trade. This generally excludes certain activities such as property development, investment, and banking.
  • The options must be granted to employees or directors who work for the company for at least 25 hours per week or, if less, for 75% of their working time.

If qualifying, employees will incur no income tax or NIC at the date of grant and none on exercise and subject to qualifying conditions, a lower rate of Capital Gains Tax charge arising from any gain on disposal of shares acquired by employees. By creating a scheme where shares vest progressively over the course of employment, you can encourage employees to stay with you longer and develop their role in the business.


Save as you earn schemes

Another option for assigning equity is a Save as You Earn (SAYE) scheme. These involve taking a proportion of an employee's salary (up to £500 a month under the scheme), and putting it aside, giving employees the option of using those funds to purchase shares in your company at a later date.

Any interest and bonus at the end of the scheme is tax-free and employees are spared Income Tax or National Insurance on the difference between what they pay for the shares and what they’re worth at the point of sale. Employees may also not have to pay any Capital Gains Tax on future disposal of the shares, if certain conditions are met.


Bonuses, commissions, profit shares

A more immediate way to align the success of your company with that of your team is by attaching a direct financial reward to their work. While shares and equity can be more rewarding in the long term, they are also riskier and more uncertain. Some employees may reasonably prefer to have any incentive be more tangible and immediate.

Performance related bonuses, commissions, and profit shares, tied to specific goals help your team benefit from the broader success of the business while limiting your financial liability.


Lifestyle incentives

With working habits changing rapidly, flexibility is becoming increasingly important for modern employees. This can be especially valuable for smaller businesses, since accommodating employees with different needs doesn’t have to cost a thing. While companies with huge workforces may feel the need to keep everyone working in the exact same way, smaller ones can often afford to take a more employee-focused approach.

Whether it’s managing time off, non-traditional work schedules or hybrid working, helping employees feel understood and accommodated builds stronger relationships and retain employees.


Training and development

Helping your team develop along with your business helps them feel valued, supported and motivated to progress in their roles. Training can also enhance an employee's skills and knowledge, which can lead to improved job performance, increased productivity and greater job satisfaction over the course of their time with you.

This can range from formal activities such as workshops, courses and professional qualifications to more informal internal mentoring programmes or secondments to different parts of the business. Providing opportunities to explore new skills and roles can also help retain employees – offering a new department or training programme can help them find a new challenge in their career without needing to leave the business.


How to use incentives strategically

In every business, your needs and those of your workforces will change over time, both as your company develops, and in line with the world around you.

  • Startups: In the early stages of a startup, cash is often tight, and it can be difficult to offer top level financial incentives. In this case, equity and non-financial incentives like flexible working hours, time off, and professional development opportunities can be very effective.
  • Growth: As your business grows, you may be able to offer more financial incentives like bonuses, commissions, and profit shares. At this stage, it's important to align incentives with specific goals like hitting revenue targets or expanding into new markets.
  • Sale: If you're preparing to sell your business, equity incentives can be particularly effective. By offering shares or share options, you can incentivise your team to work harder to increase the value of the business, ultimately making it more attractive to potential buyers, and helping keep top employees involved after you move on.


Building a motivated team with Haines Watts

By offering a combination of financial and non-financial incentives, you can motivate your team to care more, work smarter, and stay with your company for the long term. The key is to understand what you need from your team, what they need from you and how you can build a system that brings out the best in them.

At Haines Watts, we’ve worked with all kinds of business, from SME’s to international leaders, to help them scale and evolve, making the most of their resources and people. Our experts can help you understand what your employees need, balance their needs with those of your business and build a sustainable employment model that can take you forward.


To find out more, get in touch with one of our experts today.