We have proven time and time again that Northern Ireland businesses are resilient. Now, many businesses are having to work smarter than ever to deal with the ongoing effects of Covid19, the uncertainty over Brexit and getting the business back “to normal”.
Staff retention and the ability to attract the right staff have always been two of the biggest limiting factors for local business, ongoing challenges for businesses of all sizes and across all sectors.
Every business is facing the same challenge, salaries and bonuses are increasing, flexible working is being promoted and shorter hours offered to the best candidates – which could unfortunately be your staff!
In addition to the ever-present threat of having to replace key employees, your business will almost certainly need to recruit additional staff at various levels to grow the business over time and/or add new skill sets to develop the business.
We all know that disincentivised, non-engaged employees are not developing your business.
For these reasons it is important that you have considered both how you can ensure your existing staff are content and rewarded whilst motivated to grow and develop the business and also make your business attractive to potential new staff.
Just as we are all individual, each business is different and therefore each business needs to think about the demographic of their workforce to consider what will attract, incentivise and reward their employees. The best businesses understand what motivates their employees, and are always anticipating their employees’ changing requirements.
Being able to offer a competitive remuneration package that includes meaningful annual pay increases or if you cannot commit to pay increases year on year, a bonus structure that allows you to reward deserving employees can be key for certain employees, however we would all acknowledge that it can’t always be about additional cash remuneration. Some basics that should always be considered are:
- Pensions & Sick Pay/Critical illness – most generations of employees have become much more aware of the importance of a good pension scheme for example.
- Maximising tax free benefits and ensuring that you are applying the rules correctly re allowances/ expenses and benefits to avoid any costly mistakes.
- Non cash perks that enable employees to better manage their lives – should it be flexitime, homeworking, breakfast on a Friday (adjust re your workforce).
- Employee Development Plan – staff need to see how they will develop and grow alongside the business.
In terms of incentivising key employees to stay with and grow/develop your business or in terms of attracting new key employees, you should be considering some form of stock options/shares that can reward the employee financially when predetermined goals are met within a set time frame. This type of incentive can be invaluable for key staff when aiming to incentivise them to get sales/profit to a certain figure, take the business in a new direction, or prepare the business for a sale within a set timeframe.
We appreciate that not every business, particularly local family businesses are prepared to have employees holding shares in the business, however there are a number of different tax and non-tax advantaged options available, that do not involve the employee holding shares (in particular voting shares) over a long term such as:
- Employee Management Incentive scheme – a tax advantaged scheme, whereby employees acquire an option to acquire shares in the company at a later date at today’s market value.
- Company Share Schemes (approved and unapproved) – an employee acquires option to buy shares at a later date (can be on exit)
- Growth Share schemes – employees acquire shares (at relatively low cost) in the business. These shares enable the shareholder to participate in the value of the company once an agreed value has been reached.
- Phantom Scheme – employees receive bonuses based on profits/ share value rather than actually receiving shares.
We have expertise in assisting businesses with all of these, and we can assist you in understanding options available to you and your employees. Our team of specialists can design an option that will incentivise and reward your employees whilst not disincentivising other staff. The resulting option will meet your needs in term of time commitment/performance goals and overall control of business.
To find out more about designing an incentive scheme for your business contact Angela Keery, Head of Tax on 028 9032 3466 or email firstname.lastname@example.org If you are reviewing your staffing requirements our HR Advisory team is here to help you. Contact Consulting Partner Donal Laverty Tel: 028 9032 3466 Email email@example.com