EMI options - retain and motivate your employees

Now is the time to ensure that your current remuneration structure is flexible enough to survive the storm.

With government initiatives to support SMEs, you might still struggle to pay staff, so you should consider the other options available to keep employee morale high without parting with scarce cash.  

With many businesses impacted or concerned by short to medium term cashflow issues, being able to pay wages and bolster morale among a worried workforce is crucial. 

The UK government has introduced measures akin to those we have seen in Denmark, announcing that they will pay 80% of wages for employees not working, up to £2,500 a month. While this goes a long way to help junior employees, as it stands today, your options as a business in the UK may still seem limited, particularly for senior employees.

However, a tax incentive is available in the form of the Enterprise Management Incentive (EMI) scheme. EMI options can be offered to employees in lieu of pay rises or bonuses and can help ease the financial strain on your business in the current climate. 

Offering EMI options is a great cashless and tax efficient alternative to incentivise staff, when cash is being conserved. When offered as a balance to reduced salaries or as a top-up to the government’s support, it can help to keep staff motivated. Additionally, in this time of global economic uncertainty, business valuations are falling which provides the added benefit of the scheme being more tax efficient now, than it would have been mere weeks ago. 

Please note, if an employee is furloughed they are required to stop working. Given the employment and working time conditions of EMI options, there is concern that employees of new or existing EMI schemes who are furloughed may become ineligible for EMI schemes. Accordingly, we wrote to HMRC in March 2020 with respect to this matter. HMRC confirmed that they are reviewing the position and will provide an update as soon as possible.

However, we have noted that on 26 June the Chancellor has put forward amendments to EMI legalisation to be enacted through the Finance Bill. The amendments proposed, if enacted, should mean that the benefits of EMI would be available to employees who have been furloughed. It should be noted that the amendments are proposals only at this stage and may be changed or even withdrawn. Accordingly, while the amendments would be positive, we await further confirmation from the government.

This article was last updated on 6 July 2020.