The HR Perspective

The RM2 Partnership works extensively with HR professionals in companies of all kinds to deliver more effective incentives while also conserving cash and reducing taxes.

Substituting bonuses and pay rises

Equity incentives don’t deliver cash today but they can deliver bigger and better rewards in the future.  If a government sponsored scheme is used there can be large tax savings as well.

 For example, under a Share Incentive Plan, employees can receive shares in trust, free of charge within statutory limits.  After three years in trust all gains are tax free and after five years, all values are wholly tax free.  Employees can also elect to buy shares from gross salary and receive additional free shares.

Or selected employees can be offered tax efficient share options under schemes such as the Enterprise Management Incentive.  When the scheme matures any gains are taxed at just 18 per cent. with no NI to pay.  All government sponsored schemes deliver full corporation tax relief to employers as well.

Turning shares into value

Employees can readily get value for quoted shares, but in unquoted companies they can also receive value at low tax rates via sale to an employee benefit trust.

Of course shares don’t always rise in value.  But for most companies, share value depends much more on achieving medium term goals than on short term stock market movements. 

We appreciate the problems for HR departments in the current climate.  If you are an HR professional looking for new ways to optimise reward structures, get free advice from one of our experienced consultants on 0800 043 8150.  You can also obtain free factsheets here.  Detailed technical support is available here.

As President Obama’s chief of staff recently remarked: “don’t let a serious crisis go to waste!”