The best ways to incentivise management teams & key employees

24 October 2023

The best ways to incentivise management teams & key employees


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With a highly buoyant job market right now and many owners re-evaluating their lives and what's important to them, now more than ever may be a time to look at how you incentivise and retain your management team and key employees in your business.

There can be many ways to incentivise your employees as part of your reward and recognition strategy. Nowadays there is a range of incentive schemes available to business owners including the Enterprise Management Incentive (EMI) scheme and a Growth Share Plan (GSP).


How businesses can incentivise their workforce

In the past, money was seen as the main incentive and way to motivate employees. In some companies reward was based on higher productivity resulting in bonuses and higher salaries and this is still used in many companies. Today, with a workforce of mixed generations and different needs of these generations, we better understand that the key to motivation is much more complex.

Employee engagement is not all based on the financial rewards you provide, it’s about the ability to understand what drives individuals in your company and create an incentive scheme and reward and recognition package that is tailored to individuals needs and has a clear goal.


What can I offer to incentivise my employees?

Employees can be motivated in a wide variety of ways but below are some examples of ways to incentivise your team.

  • Monetary incentives or financial incentives (salary increases, bonuses, gift cards etc)

  • Profit share schemes (EMI scheme, Growth Share Plan) 

  • Employee recognition programs (including awards, verbal and written recognition, peer recognition)

  • Flexible or additional holiday

  • Flexible working

  • Wellbeing support, health support or other wellness programs 

  • Employee recognition gifts 

  • Career opportunities including clear goals to promotion

  • Professional memberships

  • Fun social events and team building events and activities

  • Volunteering opportunities

  • Professional development opportunities  & tuition reimbursement

  • A formal rewards & recognition program

  • Learning and development opportunities

  • Employee perks (like retailer discounts, money back schemes, experiences etc.)


Below we look at Enterprise Management Incentive schemes and Growth Share Plan in more detail.


What are the best incentives for employees?

It's worth considering that when looking at incentives for management or key employees, each business will be different and so will each individual in the team.

Offering competitive or market leading salaries can be important, but if your business has cashflow pressures then you may need a broader approach to remuneration and reward for your key management team.


Shares instead of bonuses

If one of your long term objectives is to retain key members of staff in the long term or if cash is at a premium, then you could consider awarding shares to employees instead of bonuses. This could be an effective way to incentivise key employees longer-term that allows them to share in company success and profitability and could be a first step towards unlocking liquidity through a future management buy-out.


Incentivising key employees with an EMI scheme

If cashflow is an issue or you want to tie the employee in longer term, then one of the key ways is to offer shares via an Enterprise Management Incentive (EMI) scheme. Using an EMI scheme may allow you to not only incentivise and retain key management team members but will also help you to buy in to the overall strategy of the business.

With an EMI scheme key employees have an option to buy shares in your company at some point in the future. The price the employee pays for the shares will usually be their value at the time the option was granted. If shares rise, the employee ends up paying a discounted price on current market value. The employee doesn't have to exercise the option to buy if the share value hasn't increased.


Tax benefits of an EMI scheme

The government offer some advantageous tax benefits from both an individual and company perspective and these are below:

Individual tax benefits: No income tax or NI contributions unless disqualified. Capital Gains Tax (CGT) payable on the sale of shares (potentially at 10% provided that the shares are sold two years or more after the grant of the option, and the holder has been a director or employee for two years or more prior to the sale).

Company tax benefits: Corporation Tax deduction on option gains and no NI contributions.


Other benefits of an EMI scheme

EMI schemes can have multiple benefits including:

  • Drive performance by tying into targets

  • Retain key staff

  • Low upfront cost

  • Build buy-in to long term strategy


EMI qualifying criteria

To qualify, your company needs to fit the following criteria:

  • have less than £30m of gross assets

  • be independent (not a subsidiary or controlled by another company)

  • have no more than 250 employees

  • have a permanent establishment in the UK


Growth share plan (GSP)

If you don't qualify for EMI, then there is an alternative which is a Growth Share Plan (GSP). The idea behind growth shares is that employees can acquire a special class of shares that have conditions attached – for example, they will only be worth anything once the company has achieved a certain value, which is usually set at a much higher point than the company's current value.


Why communication is key with share schemes

Some employees may need more explanation and communication to help them to understand the full value of an EMI scheme.

To get the benefits of buy-in and long-term retention you'll need to share your strategic thinking and make them feel part of that strategic journey, with an ability to input into the future of the company. Otherwise it may well have the opposite effect if people feel less in control of their long-term future.


How can Haines Watts help with incentivising management and key employees?

Setting up a scheme in the right way can be complex. We can work with you to map the goals of both the business and you the owner and then work out who the scheme will be offered to and how it will be structured to ensure it works towards your goals.

With the right advice and planning this type of key employee incentive can have a significant impact on your business and give you the peace of mind that your management team or key employees are highly incentivised, motivated, and bought into your vision and the future of the company.

 if you want help and advice in incentivising and retaining your key people or setting up a share incentive scheme, contact us at our offices in LiverpoolChester or Wirral.