With HMRC opening a consultation into Company Share Option Plans and Save As You Earn Plan and in light of the changes made to the Enterprise Management Incentive scheme earlier in the year, Michelmores share option team considers what a well-structured share incentive scheme means for ESG purposes and as a tool to combat the “quiet quitters”.
More than ever, attracting and keeping talent is crucial to the success and ongoing sustainability of a business. Employers and employees are still getting used to flexible working and what that really means, as well as ( whilst being flexible) how to engage and remain engaged with colleagues they seldom see. Employers are not unaware of the difficulties, hence the innovative and new strategies devised to hook and retain their employees: think new wellbeing policies and a greater focus on mental health.
Share incentives are a traditional, but underused tool in this fight to retain employees and, more importantly, to keep them engaged. The “Social” pillar in the ESG metric focusses on the impact of a business not only on the wider society but on workplace culture too. Investing in fair and equal opportunities for employees can extend to incentivising them to share in the growth of the company. There are a number of benefits:
- An opportunity to engage with employees and draw them into a conversation about the company, its goals and creating an environment of inclusivity and equality;
- An opportunity for employees to take a financial investment in the company and to engage with strategy and financial performance;
- Fostering a culture of motivation and high performance in order to achieve the metrics set out in an incentivisation scheme;
- Employees are asking questions of their employers and prospective employers, seeking companies with a robust strategy around ESG. This talent only considers the pay offer once they are satisfied with the ESG status of the business.
Share incentives tick the “Governance” pillar of ESG too. The Governance pillar refers to the decision-making and reporting processes of a business. It also includes the ethical behaviour and transparency of the practices of the business. Share incentives are a way of aligning the financial reward and performance of the workforce with those of business leaders and senior management. Good governance appeals not only to investors and regulators, but it is, more and more, a key aspect of helping employees to stay engaged and retained.
Share incentives are a good way to engage with the “quiet quitters” too. These are employees who do as much as is expected of them and not any more than that, primarily due to being disengaged with the workplace. Employers are already using the “Social” pillar tools to try to re-energise and re-engage with the quiet quitters. Share incentives should be seen as another tool to engage and attract existing talent back to greater productivity. Employees who can see where they fit in the bigger picture of the business, who understand the future outlook and roadmap are much more likely to engage with their colleagues and management even if they are primarily working remotely.
The UK Government also gets it. In April 2023 some of the legal and administrative requirements for EMI Schemes and Company Share Option Plans were streamlined to make them easier to administer and hopefully encourage the take-up of the schemes (see here A timely boost for share option schemes). More recently a consultation has been announced into the Save As You Earn and the Share Incentive Plan employee share schemes with a view to understanding how these can be improved and their use increased. The UK Government’s driving force is to understand how these schemes will help to grow the economy. With a greater understanding of the benefits share incentive arrangements bring to the competitive working environment and how they contribute to the sustainability of a workforce and the company, share incentives are a key tool for both employers and the UK Government in the drive for economic prosperity and stability.
The share incentives team at Michelmores will be happy to have a conversation with you about share incentives and how they can work in your business. If you require any further information, please contact Cathy Bryant or Anthony Reeves.
