Talk to the Taxperts

01382 312100

Rewarding Key Employees –What Are The Options?

Over the past four months of lockdown, many of our clients have seen their exceptional and loyal employees go above and beyond. Responsible business owners understand the importance of these people and may wish to reward them for their hard work and commitment.

At the basic end, an owner might simply award bonuses to the key staff, which are subject to the usual PAYE and National Insurance Contributions. Others, however, take the view that this does not go far enough and wish to reward their team with an equity stake in the business.

Such equity rewards can take many forms, a summary of which is below:

Employee ownership trusts – the owner must give up control of the business, the disposal is tax free for the owner and the proceeds can be paid up out of future profits.  All employees must be included.

Enterprise Management Incentives – in this scheme, key employees can be cherry picked and awarded share options dependent on the achievement of future performance measures.

Shadow share schemes – bonuses are calculated as if the recipient were a shareholder but paid out in the form of an employment bonus. If staff leave the business, all rights to bonuses cease as the contract is employment law based.

Approved or Unapproved share option schemes – these are more traditional share schemes, with clear tax rules, many of which are not tax advantaged.

Growth shares – these are a relatively new type of share and can provide excellent incentives for recipients to grow the value of the business from a pre-determined value, getting around some of the PAYE issues in other schemes.

There are plenty of other variations that can be explored but rewarding your key people is probably the best investment you’ll ever make. Our Employer Solutions team can talk you through the options to determine the best structure for you.

Latest News

View all latest news

March 15, 2024

Final opportunity – Urgent planning deadline for the transition to the ‘tax year basis’

Speed read Any individual who is a sole trader or partner in a trading or professional partnership will be taxed under the new ‘tax year basis’, which means…

February 29, 2024

Tax Planning Tips Ahead Of The New Tax Year

With the end of the financial year drawing close, now is the time to evaluate your tax position for the year to 5 April 2024 to ensure that…

Download our EQ app and keep up to date with tax news, changes and have access to our EQ Portal, tax calculators and key tax dates at your fingertips. Click on the relevant button on your device to download our free app.

Visit EQ Accountants Visit EQ Accountants

Explore the full range of EQ Expertise