How can I incentivise my staff on a budget?

Business face a perfect storm of increased energy, fuel and living costs, therefore it is a good time to review staff reward and incentive structures and seek out tax efficiencies.

Faced with a tight labour market, many businesses now recognise the need to retain and attract staff.

In the past a business may have paid out a bonus as a way to retain staff and help out with one-off events, such as the current inflationary spike we find ourselves facing.

If you do wish to go down this road, we would recommend giving this some thought.

Firstly, you may wish to link the bonus to the performance of the business and consider deferring the bonus until such time as your cashflow allows for payment.

Secondly, you should look through the lens of the staff you are looking to help. If your colleagues are in lower paid roles, although your employees will welcome this additional reward, for some staff on state benefits such as Universal Credit or Tax Credits, a bonus could interfere with their benefits. If your staff members raise this with you, you may wish to recommend they speak with Citizens Advice for help to understand how any bonus could impact their payments and if spreading the bonus could be beneficial.

Another consideration could be to consider implementing a share scheme, as these offer a number of advantages worth considering. For example:

• compensating for lower salaries
• helping to align your employees' interests with your own
• potentially raising working capital
• recruiting or retaining key employees

By allowing your employees to participate in the ownership of the company, you can unlock several advantages and if you can utilise an HMRC approved scheme, this would attract generous tax efficiencies.

Taxation of share schemes is complicated, as is the process of getting HMRC approval. We can advise which solution is right for you and we provide further detail on share plans and incentives on our website. If you would like to discuss how we could help you further, please contact us on 0203 862 2059 or use our simple online contact form to arrange a free initial consultation.

Date published 5 Sep 2022

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.