Staff retention – Share options

Latest figures from the ONS show employment in the UK is at a record high, as are the number of available job vacancies. The UK employment rate is now at its highest since 1971, and is also a key factor behind the increase in average wages by 3%.

This means that employers need to be doing more than ever to keep hold of, and attract good employees.

A lot of mechanisms to keep hold of your good staff involve considerable expenditure (payrises, medical insurance, improving your working environment etc.)

BUT, there is another ‘option’ to retain and incentivise your key staff…

Share options – the basics

What is a share option?

Broadly speaking, a share option is an instrument in which an employee may buy shares at a future date at a set price. One of the most common share option schemes for small and medium size companies is the Enterprise Management Incentives scheme (EMI).

What are the benefits?

Research across the world has highlighted the increase in motivation and retention rates when staff have a stake in the company in which they work for.

The main benefit of share options, instead of giving the employee an ordinary share, is that the grant of the option (if an EMI share) is tax free for the employee. Under an EMI scheme, provided the option was granted at the market value, there will be no tax to pay by the employee when the shares are exercised.

Share options are also a useful instrument for incentivising employees, as they will only make a gain on the options if the company grows in value from the grant date to the exercise date.

What if an employee leaves?

It is possible to ensure that share options granted to employees can only be exercised if the employee is in employment. This means that if the employee were to leave, subject to your share purchase agreement, they will no longer be able to exercise any outstanding share options.

Want to find out more?

We work with trained, qualified partners who can provide a free, no obligation quote for the cost of implementing a share option scheme. Get in touch to find out more.

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