Follow Planning growth
Giant

Retaining and rewarding your best people

In Planning growth, Sustaining growth, Teams - 3 weeks ago - 5 min

Retaining and rewarding your best people

Recruit, reward and retain your best people through an EMI scheme. 

Fast-growing small companies need a way to compete with large, established businesses for talented employees.

An Enterprise Management Incentive (EMI) scheme, offering share ownership is a simple and effective way to recruit, retain and reward key employees.

G is building on Grant Thornton’s history of setting up EMI schemes for businesses and has developed a simple online tool: EMI Digital. Businesses can now effortlessly set up share schemes themselves online, at a highly competitive price.

Visit our web platform EMI Digital

But why should you consider setting up an EMI scheme?

  1. Offering equity is a great way to recruit and retain your valued directors and employees. Most EMI schemes are designed to incentivise staff to stay with their company to contribute to its growth ahead of an exit such as a sale or flotation. Equity is their reward for the skills and time they contribute to the growth of the business.
  2. It’s one of the best employee share incentive schemes for smaller businesses currently available. HMRC have set up this scheme to help small business growth by providing tax advantages to employees. In simple terms, the employee will not be liable for income tax or national insurance contributions on receipt of the benefit (the EMI option grant or exercise); the only tax charge for the employee will be capital gains tax at the entrepreneurs relief rate, currently 10%, on the sale of the shares. This is at a rate much less than income tax and there is no Employer NIC cost for the company, making it a desirable reward.
  3. As EMI is a share option scheme, it allows employees to acquire shares at a price fixed at the outset, which are purchased at a later date; this is known as ‘exercising’ the share options. This means that when the employee purchases the shares, if the share value has increased, the employee’s reward increases. As with all shares, the cash value would be realised by the employee when the shares are sold.
  4. It’s low risk to both employees and employers. If the market value of the shares decreases, the employee can walk away without having paid out. If the employee leaves the business, the option scheme terminates so the employer has not given away any equity.
  5. No cash is required up front. An EMI scheme commits a long-term reward to the employee, one which will be released later down the line. This means that working capital is retained for the business and the reward is released when the event is reached. The company will ‘pay’ for the reward by granting equity when the shares options are exercised.
  6. Investors are attracted to high growth companies with EMI schemes in place as it demonstrates that the key team who have contributed to the company’s success to date are incentivised to stay with the company, to contribute to future growth.

EMI Digital provides standardised plans with the following characteristics:

  • EMI Options will only become exercisable on an ‘exit’ e.g. sale
  • EMI Options will lapse in the event of a participant leaving except in ‘Good Leavers’ circumstances. A ‘Good Leaver’ is an employee leaving on ‘good’ terms such as illness and retirement rather than joining a rival company.
  • Businesses will agree the valuation of the Company with HMRC directly.
  • Private companies only.

What does EMI Digital give me?

  1. Ready-to-use EMI plan documentation prepared in line with EMI legislation
  2. Easy-to-follow guidance on how to implement the share scheme
The EMI Digital tool was incredibly intuitive, and easy to use. Grant Thornton were fast, efficient and a pleasure to work with.

Find out more