Simply put, an Employee Management Incentive or Enterprise Management Incentive scheme is one where employees can own shares of the firm they work for at nominal rates. It is a way to bring top performers and those in core roles into the fold of the company’s long-term direction.
There are certain tax laws and prerequisites as mandated by the HMRC.
The EMI option is becoming an indispensable tool for employee retention. In these days of start-ups, successful companies can find their worth grow exponentially in a short period of time. The potential of owning wealth with minimal investment is real and EMI aligns this concept with the role of employees and their compensation. There are also many benefits of such schemes.
A Cost-effective Process
EMIs are a cost-effective method to incentivize employees. They also help in reducing taxes for the company and provide similar benefits to the employees who choose them.
Increase Employee Value
With an EMI scheme, you are essentially bringing employees into the confidence of the higher management and board. The responsibility implied via an EMI is greater and many participants will no longer want to just complete their basic duties, but also go the extra mile. Now they will be part of the company’s success in a deeper manner. They are not just working for a salary, but also to increase their EMI profits.
The EMI scheme reflects a high level of commitment and trust that the company has in its employees. It is a way of communicating how important the participant is in the larger scheme of things. This would have a reciprocal effect as the employee who chooses to own shares is likely to be more committed to the company. The probability of the employee leaving after owning some shares is much lesser.
Enterprise Management Incentive schemes are very flexible and can be customized to be compatible with the requirements of your company. EMI options can be tied into the rewards programs of a business. Shares can be an incentive for employees to hit their targets and make progress. The kind of growth seen in shares is also an attractive prospect for employees, compared to one-time payment incentives.
Begin the Scheme Early
There are certain things you need to keep in mind when it comes to designing an EMI scheme for your employees. It is better to start early. When you set up the EMI program while the business is still at a nascent stage, shares will be evaluated at a lower price by the HMRC. This allows for more growth space as the business grows over time and reduces your costs. The most obvious benefit of starting at a lower price point is that if things fall into place, profits will be much more.
More than 8000 companies in the UK offering EMI schemes according to official HMRC stats. Motivating employees is the key to running a successful business. You can learn about EMI options and gain a better understanding from the perspective of business experts.