Sharing firm ownership with your staff is possible via an employee share scheme CGT. Equity might be given to one or more essential individuals or all of your staff members, which is all up to you. Shares may also be given to non-employees like consultants and advisers. However, it’s occasionally ideal to operate separate programmes for external and internal participants. Just selecting who will get equity is the first step, and things get somewhat more challenging when determining the best kind of strategy for your unique demands. But hold for a second; let’s go back. Before getting into the specifics, why would you wish to offer someone shares in your company?
Why start an employee share programme?
Existing shareholders must be persuaded that decreasing their total ownership would be beneficial in the long term since dilution is typical when you start rewarding the more extensive staff with stock. And it makes perfect sense. Fortunately, a lot of information exists that you can utilise to support the business case for the share plan. Sharing possession makes sense from a value standpoint, and many softer advantages exist. Here are reasons of the primary arguments in favour of starting a share plan:
Entice the top talent.
The hiring process is challenging and seldom fair. One strategy for attracting top talent to the company is to provide new hires stock. To create a payment plan for employees that is competitive with or better than that of other, more established businesses with larger budgets, you may also equalise the competition by exchanging salary for stock.
Keep the most exemplary employees.
People’s perceptions of the company change when they share ownership and are less inclined to abandon something they have a stake in. Many businesses struggle with employee loyalty and replacing a leaver typically costs roughly £19k. This puts tremendous pressure on businesses large and small, but notably on those just starting or growing. Share plans have the potential to save recruiting expenses and have been shown to boost employee retention.
Boost performance and productivity
Studies have demonstrated that workers who are also stockholders put more effort into their jobs because they feel personally accountable for the success of their business. They are inspired to work hard and take greater ownership of their coworkers’ work product. Not only do more productive workers result in a better workplace environment and lower turnover, but they also produce more work, generate more income for the company, and incur fewer recruitment and retention expenses.
Ease the impact on cash flow.
However, there is a flip that savvy founders and CFOs/FDs are aware of: stock may also be utilised to lower the need for financing. Equity is frequently used to raise capital. Why not reward employees with shares or options instead of draining your cash reserves by paying them top rates and big bonuses? If done correctly, tax benefits are much more desirable than raising salaries or awarding employee prizes yearly. This allows you to keep your bank balance intact.
These advantages combine to create a more robust, happier staff that works more and is more emotionally invested in the company. And it will probably result in a tonne of extra business value. When any of your shareholders or board members inquire about why you want to begin a programme, shout out these advantages.