If you’re interested in boosting company performance and are keen to attract and retain valuable staff, then an Employee Share Scheme (ESS) is a potential option that is worth considering.
Fewer than 1% are using the scheme, yet they are proven to grow and retain staff, something that many businesses claim to be top on their list of concerns.
An ESS can create an environment for employees that makes it more meaningful for them to come into work each day. As shareholders, and possibly even as associate directors, a greater sense of purpose can be attached to their role and there is certainly greater incentive around the business performing to a higher level.
There are many ways a company can approach the implementation of an ESS. However, there are also a number of regulations around its introduction, including rules that dictate which employees can or should be included in such an offer.
YBM strongly recommends that business owners and employees alike, seek advice in this matter. Further, we suggest that the development of a rock solid shareholders’ agreement is critical. It is usually the most time consuming part of the process however it is needed to cover any possible situation that could arise.
For employees, there is obviously an initial cost to ‘buying’ into a company. However there could be strategies that enable them to take up this opportunity over time, such as a part payment upfront with the balance funded from future dividends. On the plus side, as businesses make healthy profits, there can be monetary benefits on top of the usual salary. Further, as the value of the business grows, so too does the value attached to the shares owned.
Employee Share Schemes present a good way to get employees emotionally and financially invested in the wellbeing of a business, improving retention rates and increasing staff engagement across many aspects.
The team here at YBM sees this as an opportunity for businesses moving forward. With a drought of talent and fierce competition for professionals, recruitment is an ongoing struggle for many SMEs. An ESS may well give business owners that leading edge.
There are some costs with running such a scheme, and risks such as tax implications if shares were obtained at lower than market value. There are also rules and regulations as mentioned before. However, there is a possibility that the government may ease red tape surrounding the implementation of ESSs in the future. Any move that benefits business is a welcomed one as we recover from the crisis of COVID-19.
Whether you are a business owner or an employee, if you would like to learn more about how these schemes work, please contact our office. We would be happy to discuss some bespoke solutions for you and your business.
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