Employers across a number of key industry sectors are braced for significant staff shortages threatening to hold back any post COVID-19 bounce, warns accountants Hillier Hopkins.
The UK’s road haulage industry is reporting a shortfall of over 100,000 drivers, with social care, retail and hospitality also reporting significant staff shortages.
It is, according to studies from Microsoft likely to get worse as a workforce deeply affected by COVID-19 questions how they were treated by their employers and what they want from employers in a post COVID-19 world.
Employers in the US, reports Microsoft, are facing the prospect of more than a third of their workforce resigning, choosing to follow the job of their dreams or opting for employers with more flexible and supportive working policies. It has been called the ‘great resignation’.
And when the US sneezes the UK often catches a cold.
Employees may be comfortable to stay in the current place of work for the moment, yet when the furlough scheme ends on 30 September it is likely to result in a significant movement of people in the workplace.
Add to those shortages caused by Brexit and a tightening immigration regime, employers have every right to be concerned.
What can UK employers do to attract and retain their valuable employees?
There are a number of ways to help retain, motivate and incentivise staff – both economic and through influence.
Businesses will commonly use a variety of benefits to help them stand apart from their competitors, including company cars, medical insurance, gym memberships, support with childcare, interest free loans to even living accommodation. These benefits will have tax implications for employers and staff. Hillier Hopkins has created a detailed briefing sheet on these more traditional benefits, which can be found here.
Enterprise Management Incentives (EMI)
Designed to help small and medium-sized businesses reward and motivate staff, EMIs are effectively a share option scheme. They are easy to implement and manage, flexible and have attractive tax positions for both employers and employees.
To participate, a business must have assets of £30m or less and under 250 employees. Businesses participating must also be trading. A list of excluded trades can be found here.
Employees must work at least 25 hours a week or, if less than that, spend at least 75% of their working week with that business. Hillier Hopkins has created a detailed briefing sheet on EMIs that can be read here.
Growth shares can incentivise directors and employees by offering them a chance to benefit from the growth in value of the business. A new class of shares is created, but the holders of these new shares will not benefit from them until the value of the business exceeds a predetermined growth hurdle. The growth in share value will be subject to Capital Gains Tax rules, which is currently taxed at a lower rate than Income Tax that would be payable on bonuses, salaries and benefits. Whilst there will be a cost in creating growth shares, there is no ongoing cash cost to the business, which can make them more attractive than paying bonuses. Growth shares can also be used in conjunction with EMI options.
Other share schemes
Although Enterprise Management Investment schemes are the most popular of the tax advantaged share schemes, there are several other options available. Speak to your advisor for more details.
Economic incentives are not the only way a business can motivate and help retain staff. Softer incentives that provide influence and a voice at the top table can also prove powerful, particularly when combined with economic incentives.
One approach is an employee board representative, giving employees a voice in the everyday decision making of that business. This can be approached in a number of ways, with an employee representative appointed a board director, or as part of an employee advisory panel. Such an approach can provide greater awareness of the commercial drivers, and pressures facing the business for employees.
This can bring benefits to a business such as greater employee engagement and buy-in, however, employers may worry about losing control of the business or slowing the speed of decision making. Employees can also be put off by the duties and responsibilities a board position carries. Employers should consider the pros and cons of employee directors and seek legal advice before taking any action.