Incentives

Attracting and retaining the best people is vital to the success of any business and so incentivisation structures are a crucial and expected part of the venture ecosystem. 

Our incentives team has extensive experience in helping start-ups to identify the best way to deliver the behaviours they need and at the same time maximise the position of their employees and executive directors.

Employee tax

Employers need to ensure that expenses and benefits including new joiner bonuses, performance bonuses, retention payments, termination payments and the like are taxed correctly, particularly given the shift towards agile working. Our team advises on the full range of employee tax issues including the implications of IR35.

Enterprise Management Incentive (EMI) options

EMI options are designed to incentivise the employees – including executive directors - of smaller companies with growth potential and are commonly seen in venture companies. The scheme has generous tax advantages for both the company and the employee, with usually no income tax or National Insurance contributions payable and a potential capital gains tax of only 10% on the sale of the shares. The rules are applied strictly and so it is crucial that you take appropriate legal advice when setting up the scheme – and understand what you need to do to make sure that you maintain your qualifying status.

Growth shares

It is common to see venture companies create a special class of shares that allow its holders to share in the growth in the value of the company above a certain hurdle. Unlike EMI options, growth shares can be issued to non-employees, such as contractors and consultants, and so can provide a broader incentivisation structure. Growth shares can be voting (so giving the holder a say in the running of the business) or non-voting (so giving the holder purely economic rights) and can be linked to unique performance criteria for vesting to provide a flexible way to incentivise key individuals.

Unapproved options

In some cases, unapproved options – that is options without any tax advantages – may be the most appropriate structure for your company. Like growth shares, unapproved options can be issued to anyone, whether or not they are an employee. 

Find out more here.