UK: Incentives that retain staAE.

UK: Incentives that retain staAE. - Make sure you offer the right remuneration package.

Last Updated: 31 Aug 2010

Make sure you offer the right remuneration package.

With a much more buoyant employment market in many industries, SMEs are experiencing difficulties in retaining key individuals. How can employers give incentives to and retain their most-valued employees? Offering the right remuneration package can help. Two increasingly popular methods of structuring remuneration packages are:

Flexible benefits or cafeteria schemes - where employees can choose from a menu of benefits as part of their remuneration package. Value is attributed to each benefit, such as company cars, pensions and health insurance.

Employees select the benefits up to an agreed value that best suit their needs (age, lifestyle etc.) saving the employer NI contributions and, if well structured, accelerating tax allowances.

Equity participation by direct share ownership or share options. These schemes can be structured tax efficiently and without giving away any substantial share of the equity. They can also tie employees into the business for a number of years if they are to take advantage of the growth of the company to which they have contributed. By taking advantage of the trust of employees in the company, a market can be established for the shares and the company can provide funds (and attract tax relief) for the purchase of its own shares. Shareholders' agreements can be implemented to ensure that, should a shareholder cease to be employed by the company, the shares are sold back at market value or a predetermined price.

There are many other remuneration ideas that satisfy both employee and employer. A good accountant can help structure cost-effective remuneration packages, which take advantage of all tax breaks available and also gain the most value for the employee at the lowest cost to the business.

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