Employees share their firm’s future

Employees of a company which specialises in innovative engineering solutions for buildings, industry and the environment across the UK have bought into their own future after taking a stake in the company through a type of share scheme becoming increasingly popular across Wales.

The 14 eligible employees of the SCS Group, based at Tredomen, near Caerphilly, now all own a share of the firm through a HMRC approved Share Incentive Plan which allows the company to give them shares and for the employees to buy shares tax efficiently.

According to professional advisors Broomfield & Alexander, who were behind the plan, the SCS Group is one of a growing number of owner managed companies turning to HMRC approved share schemes in the current difficult economic climate in which offering key staff pay rises and incentives is becoming more and more difficult.

The plan was put into place when Allan Meek, managing director of the company - whose products and services include control and automation systems, smoke control packages for multi-storey buildings and engineering consultancy - decided that his succession plans for the company needed to ensure that its values were protected over the longer term.

“I spoke at length with Broomfield & Alexander, and concluded that employee ownership would achieve this key objective, and provide the right way to retain and incentivise my staff, who are key to the success of the company,” he said.

“Broomfield & Alexander’s Taxation Team helped us through the whole implementation process, which included the design of the Share Incentive Plan, agreeing share valuations and clearances with HMRC, and the share and business restructuring process required.

“Our staff care about the future of the business and our relationships, and this is even more apparent with the introduction of the employee share plan. The whole process went very smoothly thanks to Broomfield & Alexander and their knowledge and experience in handling HMRC approved Share Incentive Plans.”

Gavin Oliver, of Broomfield & Alexander, who also now assist with the ongoing operational and reporting requirements of the Share Incentive Plan, said that a variety of HMRC approved share schemes existed.

Enterprise Management Incentive share options in particular were proving very popular, he said, as they were flexible and acted as a tool to attract, retain and motivate key staff.

“Broadly, they give employees the opportunity to buy shares in a qualifying company at a later date, such as a sale, but at today’s price,” said Gavin.

“They are tax efficient because they enable the shares acquired by the employee to be sold at gain that is subject to capital gains tax, which is significantly lower than the income tax and national insurance they would have to pay if they were to receive a bonus or be given shares in an unapproved way.

“Whilst there is undoubtedly a cost to establishing HMRC approved shares schemes, they can be effective in establishing the owner’s strategic objective of attracting, retaining and motivating key staff. They will also either reduce or remove the need to pay annual bonuses and usually result in a payback within two years.”