People aren’t just part of a business, they make it. So the quality of your staff means everything if you want to grow. But how do you attract top talent when your pockets aren’t quite as deep as those of your competitors?
When you’re a little fish in a big pond, catching the most talented staff can be difficult. After all, large companies generally have the better bait, being able to offer perceived long term stability, defined career progression, excellent benefits, and – more often than not – juicy salaries. But good staff are crucial to good business, and for the small to become mighty, they simply must be able to recruit an army of highly skilled, ambitious and driven candidates to help get them there. So, what can you do if you can’t afford to pay premium wages?
The answer (as is with most things when it comes to smaller businesses) is to be a little more creative with the perks you offer, and EMIs are an excellent example. EMIs, or Enterprise Management Incentives, are tax advantage share options which act as a reward for employees. They are specifically designed to help small ‘higher risk’ companies to attract and retain the most talented staff to help grow the company.
EMI rules are flexible enough to enable a variety of different arrangements to be put in place for participants. In short, qualifying employees can be granted tax advantaged share options with a market value of up to £120,000, and these must be exercised within 10 years. Grant of the option is tax-free and there is usually no tax or NIC for the employee (and no NIC charge for the employer) to pay when exercised.
Gains made on shares fall under Capital Gains Tax – gains above £10,100 are taxed at 18% (28% if higher rate income tax payers) – rather than the higher income tax rate. In addition, employees who own more than 5% of the company’s share capital will also qualify for Entrepreneurs’ Relief. This provides a more advantageous rate of 10% for the first £5m in lifetime gains.
Since launching, the take up of EMIs has been huge – so much so that the government did away with the limit on the number of employees able to be granted share options (the only restriction is that the maximum value of the options is below £3 million in total). This is proof that small businesses are serious about valuing their staff and are willing to go the extra mile to retain them.
Administration of the EMI is minimal, and qualifying criteria for employers and employees is flexible. So if you think EMIs could work for your business, please contact our Specialist Tax Team for further advice.
