Employee Share Schemes Explained for Growing UK Businesses 

Employee share schemes have become one of the sharpest tools available to UK companies trying to hold on to their best people. FD Recruit’s recent virtual boardroom on Share Schemes, brought in two specialists from MHA to unpack how businesses are putting these plans to work without draining cash reserves.  

Tax partner, Steven Tebbutt and senior tax manager, Jonathan Harvey walked through EMI options, growth shares and employee ownership trusts, along with the mistakes that trip up companies who rush the setup. 

“The main driver we see is that companies are trying to tie in their key staff, because arguably they are the most important asset many businesses have.” 

Why Employee Share Schemes Suit Growing Companies 

Jonathan Harvey opened by explaining who reaches for these arrangements. Start-ups short on cash hand out options instead of bonuses, protecting capital while giving staff a real stake. Fast growing firms award shares while valuation is low, so employees capture more upside as the business scales. Companies eyeing a sale use schemes to keep key people focused, and PE backers insist on incentives post deal. 

Types of Employee Share Schemes Explained in the Boardroom 

The session covered four main routes: 

• EMI (Enterprise Management Incentive): The most tax efficient option for qualifying companies, with April changes raising the asset threshold to £120 million 

• CSOP (Company Share Option Plan): A useful backup when EMI conditions cannot be met, though the per employee limit sits lower at £60,000 

• Growth shares: Shares that only gain value once a performance hurdle is hit, keeping the initial tax bill low 

• Employee Ownership Trusts: A route to selling a controlling stake into a trust held for every employee’s benefit 

Employee Ownership Trusts Offer a Different Kind of Exit 

An EOT is not about handing shares to individual staff, it is a sale of the business into a trust that benefits the whole workforce. 

“Selling to an employee ownership trust lets owners preserve their legacy by passing shares into a trust that benefits every employee, keeping the culture and long-term future of the business intact.” 

Vendors pay an effective 12% rate, below the 24% CGT top rate, with £3,600 tax free staff bonuses yearly. The trade-off is control, since owners must give up at least 51% of the shares and voting rights. 

Pitfalls MHA Sees Time and Again 

Both speakers stressed that poor communication undoes more schemes than bad tax planning. Staff who do not understand what they have been granted rarely feel the intended pull towards performance or loyalty. Liquidity is a recurring headache too, since private shares have no open market and valuation disputes can surface later. 

In Summary 

Employee share schemes give UK businesses a practical way to reward and retain staff, from EMI to full employee ownership. The right choice depends on company size, growth stage and what the owners want from an eventual exit. Specialist advice at the design stage is the difference between a scheme that motivates people and one that backfires.