EMI options - a recruitment tool for talent
Fast growing companies need to attract top talent to achieve success. Increasingly, director level hires are actively seeking an equity stake in the business, especially if they’re taking a bit of a risk in moving to a smaller business and taking a hit on basic remuneration.
Enterprise Management Incentive options (“EMI”) remain one of the best ways to provide that equity, providing tax efficiency for the business and the recruit, flexibility of delivery, and control for the company as to timing and level of reward. Here are some reasons why:
- An EMI share option is discretionary, so you can choose the appropriate level of equity for your new key employee. The actual amount is up for negotiation, but a 5% stake for a CEO level hire wouldn’t be unusual.
- An EMI option is flexible. You get to decide when the option is exercisable, and on what basis. Set your performance conditions based on what you want your new hire to achieve in your business. If you’re looking for a sale, make sure those options only deliver value when the sale is achieved.
- An EMI option can help your cashflow. The possibility of a big payout – and the potential of paying only 10% tax on gains – can be a great swap for a lower salary. Plus, for the company, there’s usually no employers’ NICs associated with the exercise of an EMI option, and there can also be a corporation tax deduction.
- An EMI option can be cancelled if things don’t work out – just make sure the share options lapse if someone leaves. That’s much easier than buying back shares.
After the summer break, there’s renewed activity in recruitment. Get yourself and your business ready to make the best share option offer to get new talent up and running.
For more information on EMI share plan options download our free factsheet, or call us on 0208 949 5522 for a free consultation.