Unlock the power of equity to attract and retain talent

Attracting and retaining talent remains a top priority for startups post-pandemic. There are early signs that scaleups, startups and SMEs are powering the UK’s recovery. Tech companies, in particular, are quickly closing in on pre-pandemic hiring levels.

But with more vacancies comes greater competition. Startups have a fight on their hands. Now is the time to optimise talent acquisition tactics and consider what might be missing from your recruitment strategy.

Applicants will want to see an impressive employee benefits package. In fact, 45% of British employees expect one. But for your company to compete, you may want to consider offering more than just quirky office perks or discount codes.

One employee benefit that’s sure to make your startup stand out is equity. Sharing equity is a great way to attract talent, incentivise teams and improve retention.

In this article, we’ll explore equity as an untapped resource. A tool in the arsenal in the battle for talent. One that HR teams, recruiters and business owners can utilise to attract the right people and encourage them to stick around.

Using equity to attract and retain talent

Let’s explore the role of equity in attracting and retaining talent.

Attract talent

Early-stage startups typically don’t have a lot of money to play with, so it’s not always possible to offer highly competitive salaries. One solution is to leverage company equity instead. 

Not only will this help to preserve cash flow but also attract applicants with the possibility of a lucrative reward for their loyalty. 

Using equity as an incentive to attract talent is commonplace in sunny Silicon Valley, but less so in the UK. So adopting an employee share or option scheme at your startup is one surefire way to ensure that your benefits package stands out. 

Especially as applicants in the UK are genuinely interested in getting a slice of the action. In a survey we 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 various ways to share equity with employees, which we’ll explore in more detail later. One way is with an Enterprise Management Incentive scheme (EMI), something Simon Adcock CEO of ATEC-Security believes attracted two talented team members:

“In late 2019, our commitment to an EMI scheme was instrumental in securing the services of two new leadership team members who have since made a critical difference to our business performance.”

Clearly, equity has a leading role to play in talent acquisition. But aside from that, you might be wondering what’s in it for me and my shareholders? Why should I share equity with my team

There’s a strong business case for setting up an employee share or option scheme. We’ve put one together that you can download for free, take a look through and pass on to your shareholders. 

Business Case GIF

Retain talent

Let’s say you’ve secured a fantastic addition to the team. What then? What role does equity play in helping to retain talent? 

Firstly, philosophy. 

The idea behind sharing equity is linked to The Ownership Effect. When an employee has a vested interest in a company (literally), they're more inclined to contribute their very best and also encourage (and support) their colleagues to do the same. 

The Ownership Effect

Essentially, equity aligns and unites teams behind a common goal. That creates a strong team, a happy team of effective communicators and collaborators more likely to stick around.

In a survey conducted by 3Gem, nearly half of the founders, owners and senior managers surveyed agreed that their share scheme had strengthened their company culture. 

Secondly, equity is typically used as a long-term incentive.

Employee share option schemes like EMI can be conditional, which means that equity is not released immediately (in most cases). For a recipient’s options to vest (that is grow in value), conditions must first be met. 

Conditions can be time-based, performance-based or a combination of the two, which cultivates long-term thinking. Employees work towards long-term goals with the promise of equity as an incentive. Naturally, this helps to improve a company’s overall retention rate.

Talking of EMI, Antonius Wubben director of Kaizen Furniture, believes that it’s a brilliant tool for retention:

“There is nothing better to retain your staff than to recognise their talents and by providing them with EMIs that will make them feel proud and more part of the business.” 

Furthermore, a whopping 95.2% of existing Vestd customers operating an EMI scheme say it has helped with retention.

How to share equity with the team

So, equity has the power and potential to attract and retain talent. But what’s the best way to go about sharing equity with the team?

There are plenty of options available to UK SMEs, startups and scaleups. Eligibility for the various schemes depends largely on the size of the business and the industry. 

Some schemes are HMRC-approved with attractive tax advantages, whereas others offer greater flexibility. Take a closer look at the different schemes to decide which one is best for your business.

You should first consider whom you want to give shares/options to, how much equity to allocate and when. We’ve put together a list of 10 questions to consider when setting up a share scheme.

Traditionally, setting up an employee share scheme traditionally is a painstaking task typically involving tons of paperwork, lawyers and accountants. But there’s a better way; digitally. 

Vestd is the UK’s first and only regulated digital equity management platform designed to make setting up a share scheme much simpler. 

So, if you’re thinking of levelling up your recruitment strategy by sharing equity, book a free consultation with a member of the team and make it happen.