Guy Mucklow, CEO of Postcode Anywhere, looks at the benefits for SMEs of Enterprise Management Incentives.
Recruitment and headhunting agencies have never been more active, and more companies than ever are actively targeting and poaching experienced staff from their competitors.
Yet more often than not, what drives individuals to move jobs is ambition – a burning desire to undertake a role that challenges them both intellectually and professionally, rewarding them sufficiently for their success. In reality, few employers actually manage to tick both of these boxes, failing to identify either what truly drives employees, or sufficiently fosters ambition by incentivising success.
To help business leaders across the board incentivise ambition and performance, the government has recently introduced a number of initiatives. One such initiative is the Government’s Enterprise Management Incentive (EMI) scheme which allows business leaders to motivate staff by offering generous tax incentives, encouraging wider share ownership in the business. The scheme is ideal for smaller, entrepreneurial companies not only enabling but actively encouraging staff to grow with the business and reap tangible rewards for doing so.
To qualify, companies must have gross assets of no more than £30 million, not be under the control of another company, and operate in a qualifying sector (property development, financial services, farming, hotels, nursing homes, leasing, legal and accountancy services are all excluded). In general, a company can select whoever they want to join the scheme, provided he or she is an employee of the company, working at least 25 hours a week or, if less, 75% of their work time, and he or she does not own more than 29% of the equity in the business.
Since being introduced, the scheme has proved to be incredibly popular among British businesses and from April 2012 to April 2013 the value of share options issued under the EMI scheme increased by 25% to a record £250 million.
The benefits of introducing the EMI scheme into a business are numerous but below are the three key facts I think employers should take on board:
It goes without saying that a motivated workforce is a productive workforce. By introducing an EMI scheme employees will feel much more valued as they may one day be shareholders in the business. In turn employees will be likely to start treating the business like it’s their own, buying into the vision of the company’s future, aligning passion with success, as ultimately the success of the company will provide a very meaningful impact on the individual’s future.
An EMI scheme is a good way of retaining key employees, particularly at critical times such as the early stages of your company or when you are working on a new product. It will also help companies that might not be able to match the salaries paid elsewhere, yet who still want to attract the best talent or are looking to scale their business and need to have the whole company on board to scale up successfully.
The scheme also gives employers the opportunity to reward employees in line with their effort and performance. This is an excellent way to boost morale among team members and provides a clear incentive for others to put in maximum effort which, of course, is good news for any business. On the flipside the benefit for the business owner is that you only pay in line with the results the employee delivers.
It is all too often a major frustration for an owner or founder that other people in the business do not share the same passion that they do. As a result EMI schemes can be hugely beneficial to both parties; as well as creating a persuading driver for employees to stick with the business through difficult times, it also seeds an entrepreneurial passion for success across the wider employee base.
For more information on EMIs, visit the UK Government website here.