Among the keys to a successful business are the recruitment and retention of the best employees, as well as the creation of a stimulating and enjoyable company culture that makes people want to keep working for you. The latter can be difficult to achieve but if you are prepared to consider what your employees truly value and think outside of the box, you can certainly do it.
Having ‘skin in the game’ – bonuses and share schemes
Companies have, for many years, put in place incentive plans whereby employees can share in the profits and successes of a business. A simple option is to implement a scheme through which employees receive a bonus when they or the business meets certain performance indicators. This can be useful for rewarding employees for their hard work however it does have an effect on the company’s cash flow.
Another option is a share scheme whereby employees can receive shares in the company and have “skin in the game” when an exit comes along. Share schemes can be really attractive to businesses of all stages including start-ups and high growth businesses, as well as more established SMEs, because the company does not have to give out cash on day one or soon thereafter. Like cash bonuses, share incentive schemes can be linked to performance targets, however, they are long term incentives as the employee will often not receive the cash benefit of the share scheme until the company exits. Another great feature of employee share schemes is that, in certain circumstances, they can offer their participants certain tax advantages which can make them even more attractive to prospective and current employees.
A great example of the success of employee share schemes is Skyscanner, the travel search engine which was sold last year for £1.4 billion. It has been reported that 674 Skyscanner employees, through employee share schemes, owned roughly 8% of the company, with a potential value of £122m – approximately £166,000 each. Such a return shows the value in employee share schemes as a means to incentivise staff as part of a salary package. Through our work in the Scottish start up community we have seen a rise in the number of companies using share schemes for such a purpose. This example highlights the potential value in employees accepting such an offer.
Due to the great flexibility of share schemes it is advisable that you take full legal and tax advice on what is the best type of scheme for your business to introduce. We have a wealth of experience in setting up share schemes for clients and can help you consider your options.
Thinking outside of the box
More and more companies are thinking outside of the box when it comes to incentivising their employees. Employees are not always motivated by money and many will look favourably upon incentives which are focused on improving the working culture of the company, or helping them achieve a better work/life balance – quality of life is key for employees.
These types of incentivisation schemes can involve a financial reward as part of improving the working culture, or they can be purely non-cash based. Some examples of great, alternative incentive schemes are:
- Brewdog – we all know how innovative this company is, and how they like to challenge the norm. Well they have done it again with their latest employee incentive – ‘Paw-ternity leave’. If an employee gets a new dog or puppy, the company will allow the employee up to one week off work to help them bond with their new addition. They also offer dog friendly offices should you need to bring your dog to work;
- Zappo’s – every month the company gives every employee $50 to give to a fellow employee of their choice. This is so that employees can reward their colleagues for their hard work and doing a great job. This is a really interesting means by which you can encourage peer-to-peer recognition of hard work in your business;
- Intel – they offer to reimburse up to $50,000 of tuition for employees who want to continue their education and professional development.
Get your contracts of employment just right
Of course, the most obvious way of keeping hold of your best employees is by having a well drafted contract of employment. In effect, this can make leaving the business a less attractive option and there are certain ways in which you can do this:
- Length of notice period – there is no legal prohibition on how long a notice period is. A notice period must match the statutory minimum periods but can be negotiated between the parties to be as long as the parties agree. By including a longer notice period, you can deter employees from leaving your employment without the company having the necessary time required to recruit a suitable replacement;
- Post-employment restrictions – these types of restrictions can be utilised by an employer to protect it from an employee leaving to immediately join a competitor or to attempt to recruit your remaining employees or customers, which could damage to your business.
These are just a few examples, but there are many other ways in which a contract of employment can provide protection for employers who want to protect against the effect of losing their employees. Our employment law specialists can provide advice to you regarding how your contracts of employment can help to retain employees.
Keeping people happy
The bottom line is that keeping your employees happy is essential to help your business grow and develop. Motivated and engaged employees can help the company achieve the goals set by its shareholders and Board of Directors.
By Jo Nisbet, an Associate in the Corporate team at leading law firm Harper Macleod, who specialises in advising SMEs and high growth businesses.
Harper Macleod are supporting the upcoming Scotsman Conference – Inspiring Growth: Alternative ways to take your business to the next level. To find out more, or to book your place click here.