Building your future success

Staff Incentive Planning for Recruiters

You will probably have key consultants or members of staff whose expertise are paramount to the future success of your business. In most cases these people will be rewarded by way of annual bonuses, commission schemes and/or attractive salaries. An alternative is to look at equity based incentive schemes, which whilst involve some complexity, do work well in terms of keeping your best people working alongside you. Here you can find some facts on the most common equity based incentive schemes.

EMI Scheme

Enterprise Management Incentive Scheme

An Enterprise Management Incentive (EMI) Scheme is a motivational plan for employees, whereby you grant the key employee the option to acquire an equity stake at a set exercise price at some point in the future (normally when the company is being bought by a third party).

Some facts on the Enterprise Management Incentive (EMI) Scheme:

  • EMI allows for options worth up to £250,000 per employee
  • If the exercise price is below the market value as at the date the options are granted then the employee will be looking at paying income tax (and possibly NI) on the difference.
  • The options can be linked to certain key performance targets and you can be selective about which employees you involve.
  • The exercise price is geared towards the value of the company at the time the options are granted, so if the company’s value goes up the employee stands to gain. The cherry on top is that the value uplift will (as things stand) be taxed under the friendly Entrepreneurs’ relief rate (more below).
  • There are also qualifying criteria in respect of the employees working week and commitments.
  • No tax is ever payable under this scheme until options are exercised.
  • There are some costs involved in setting up and administering the scheme but EMIs remain the popular choice in the recruitment world.

For more information on the EMI Scheme and other staff incentives, you can download our ‘A Guide to Share Option Schemes’


Company Share Option Plan

This scheme can be used to give options to employees to buy shares in their employing company. Typically the options must not be exercised within 3 years of grant in order to qualify as CSOP options, and in order for their to be no PAYE charge the exercise price must be no less than the market value at the date of grant.

  • Using the figures above, you might grant options now that allow the employee to buy shares at £0.40 (today’s value) in 3 years time (when the shares are worth, say, £1).
  • The EMI entrepreneurs’ relief concessions do not apply to CSOP schemes, so to qualify for ER the employee would have to exercise, then for at least 12 months (and at the date of sale) hold at least 5% of the share capital and be an officer or employee.

The cumulative value of options granted to an employee must not exceed £30,000 (£60,000 from April 2023) at the date of grant.


Save as You Earn

Employee enters into a 3 or 5 year contract to save between £5 and £250 per month in the scheme. At the end of the savings period the money is used to buy shares at a fixed price, which may be set at up to a 20% discount. These are not popular schemes for small companies, they are more popular in larger businesses.


Share Incentive Plan

SIPs are a very tax efficient way of giving small numbers (low values) of shares to employees as a long term incentive. But they are required to be ‘all employee’ schemes (all on the same terms) so there would be no way of using the scheme to distinguish your target employee from the other employees of the firm.

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