By Grant Esterhuizen, partner, Lester Aldridge
Nick Clegg recently made an announcement that he plans to promote the removal of some of the barriers to employee share ownership in the UK and thereby create a “John Lewis economy”.
He calls it a “John Lewis Economy” because the John Lewis Partnership, which is the group that encompasses John Lewis department stores and Waitrose supermarkets, is owned by its 76,500 partners, all of whom are its permanent staff members. Mr Clegg hopes to create a tool for maximising staff engagement levels and retaining employees who are vitally important to helping a business achieve its full potential and growth.
While further and fuller details of Mr Clegg’s plans are yet to be made available, it is worth noting that an “Enterprise Management Incentive” or “EMI” scheme remains a tax advantageous share scheme for employees and employers alike.
Under an EMI scheme, an employer can grant share options to employees who will then have an opportunity to exercise those options to purchase shares and own a stake of the business that employs them.
An EMI scheme is a tax efficient way of ensuring that staff are engaged in their work as, if employees are stakeholders in a business, they will realise that the more profit “their” business makes or the more it grows, the greater the reward they will ultimately receive. It provides employees with a degree of control over returns — both theirs and the company’s.
An EMI scheme may also be an attractive tool employers can use to attract or to retain the services of key staff who may otherwise demand a salary increase for their continued involvement in a business, which can be difficult to satisfy in the current market.
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