What is the value of a share scheme in a recession?

Posted by RM2 at 17:20 on 14 Sep 2020

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It goes without saying that 2020 will be a memorable year. A country in lockdown resulting in businesses feeling the effects for some time to come. The UK has entered into recession for the first time in 11 years. There is no doubt that there will be some tough times ahead and businesses will be relying on their staff to ensure they pull together and come out the other side in the best shape possible. If businesses are to rely on their staff, it is vitally important that they attract and retain the right people. How can this be achieved without breaking the bank? In times of hardship cost cutting and protecting the cash in the bank is at the top of a business owners’ list.

Share schemes are an effective tool to attract, retain and motivate staff without using precious cash in the business. Having “skin in the game” encourages staff to invest their time and commitment in the company to contribute towards its future growth. It provides a sense of ownership and inclusion.

There are a number of HMRC recognised share schemes that are attractive to employers and employees alike. The Enterprise Management Incentive (EMI) allows a company to make a grant to an employee at a discounted valuation, for a minority holding. There is no cost to the employee at the time of grant and the employer can attach performance conditions at their discretion. If the intended targets are not met, the option to buy the shares falls away.

Other HMRC recognised share plans are the Company Share Option Plan (CSOP) (for those companies that don’t qualify for EMI) and an all employee Share Incentive Plan (SIP).

RM2 specialises in employee share schemes from establishment through to administration. If you would like to discuss a new or existing share plan, please get in touch by emailing enquiries@rm2.co.uk and we can arrange a call at your convenience.