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The Joy of Enterprise Management Incentives
Read our free guide to the UK's most tax-efficient share scheme.
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3 min read

Could share schemes solve the UK recruitment crisis?

Could share schemes solve the UK recruitment crisis?

Table of Contents

All this talk of the UK ‘recruitment crisis’, coupled with the phenomenon experts are calling the ‘Great Resignation’, is enough to fill anyone with a sense of dread. But is it all as bad as it sounds?

Back in August 2021, job vacancies in the UK hit a record one million. And the current unemployment rate is lower than initially predicted, about 4.6%. But that’s good news, right? Well, it would be if it wasn’t more complicated than that.

Experts have warned that there are as many as ten jobseekers for each role in some areas of the UK. How is that possible when there are so many job vacancies? Well, while the current unemployment rate isn’t as high as expected, there are still millions of job seekers looking for work.

Plus, the Government’s furlough scheme closed at the end of September 2021. While successfully protecting many jobs, not every company will have recovered enough financially to bring all furloughed employees back full-time. So it’s likely that some formerly furloughed workers will add to the number of jobseekers over the coming months.

But there’s more. Across industries, there's a shortage of workers with specific skills, most notably truck drivers, carers, nurses and IT professionals. So while vacancy numbers are high, as frustrating as it is, there are just not enough applicants ticking the right boxes for the roles. 

As Andrew Hunter (co-founder of Adzuna) puts it, "many of the people currently out of work aren’t matching up to the jobs on offer, despite an acute talent shortage."

And in the wake of Brexit, some firms believe the reduction in the number of EU applicants has added to their recruitment difficulties, especially in the transport sector. It’s a complex situation, and a lot of factors come into play. 

There are even calls for recruiters not to be so ‘picky’. But recruiters and HR teams are under immense pressure as it is, and they have a responsibility to the team to find the right fit. 

So, what tools could they add to their arsenal to help them in the battle for talent? A killer employee benefits package that outshines the competition. And no, that doesn’t necessarily require deep pockets. Not the top benefit we’re about to talk about anyway.

Employee share schemes

We're talking about employee share schemes, something countless small businesses aren’t making the most of, or in some cases, are even aware of. That’s surprising when more and more applicants are seriously taking equity into consideration.

In a study conducted with YouGov, when choosing one identical job over another, one-third of respondents told us that a company share scheme would tip the balance for them. 

There are ten different ways of sharing equity with a team, but first, let’s take a quick look at the reasons why progressive companies give employees shares in the first place.

Numerous studies show that employee share schemes help to:

  • Attract talent
  • Retain talent (i.e. reduce employee turnover)
  • Increase productivity (and improve performance)
  • Boost employee happiness and engagement
  • Preserve cash flow
  • And increase overall business value in the long run

In fact, our recent deep dive into the impact of one such scheme, Enterprise Management Incentives (EMI), revealed overwhelmingly positive results. EMI is a tax-advantaged share options scheme, especially for UK SMEs.

  • 93% of Vestd customers confirmed that EMI has aided their recruitment efforts
  • 95% agree that EMI has helped to improve employee loyalty (retention)
  • And 93% believe it’s enhanced their company culture and team alignment.

All of the above are key ingredients for growth. And ultimately, a share scheme encourages employees to stick around because they know in time they’ll be rewarded for their contribution to the company’s success, with a stake in the business.

When an employee is invested in the business, they’re usually more inclined to give it their all and support their colleagues as they work toward the same goal. We call this the Ownership Effect.

Plus, employee share schemes can be conditional, meaning equity is only released on the basis that the recipient hits clear KPIs (or other performance-based or time-related milestones), giving recruiters, HR teams and the board peace of mind.

Now, back to the different types of share schemes. Four are HMRC-approved, thereby offering tax advantages to both employer and employee:

  • Enterprise Management Incentives (EMIs)
  • Company Share Option Plans (CSOPs)
  • Share Incentive Plans (SIPs)
  • Save As You Earn (SAYE)

There are also six ‘unapproved’ methods for sharing equity. And the benefit of those is that they are super flexible. The term ‘unapproved’ simply means there’s minimal input from HMRC and less tax-advantageous than the HMRC-approved schemes. 

There’s so much more to be said about share schemes. Our employee share scheme guide goes into more detail about the different ways to share equity. 

It’s important to remember that every business is unique so companies must do the research to see which scheme is right for their team and find the best way to set it up.

That’s where our equity specialists come in, book a free call today to find out more about Vestd.

In any case, employee share schemes alone can’t solve all of the UK’s recruitment problems, but they could help solve some recruitment woes, one team at a time.

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