Could share schemes be a solution to the UK recruitment crisis?

Share schemes, probably not the first thing that comes to mind when talking about the UK’s recruitment woes. But we think we might be onto something, so if you’re in HR or recruitment, you might want to read this.

All this talk of a recruitment crisis, coupled with what the experts call ‘The Great Resignation’, is enough to fill anyone with a sense of dread. But is it as bad as it sounds?

If you’re in HR or recruitment, you probably already know that it is. But just for context, last year, job vacancies in the UK hit a record high. And the numbers just keep rising; more than a whopping 1.2 million vacancies need filling. 

What that means is that firms are suffering from staff shortages, skilled workers in particular. But they're struggling to fill the vacancies they so desperately need filing for a number of reasons.

While vacancy numbers are high, there aren’t 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."

In the wake of Brexit, some firms believe the reduction in the number of EU applicants has added to their recruitment difficulties. 

And with so many vacancies, the job market itself is oversaturated. Some firms are going to extreme lengths to beat the competition and bag talent, offering graduate lawyers starting salaries as high as £150,000!

The job market right now is a battleground. 

There are calls for recruiters not to be so ‘picky’ but in all fairness, they have a responsibility to find the right fit for the business. 

So, what tools could they add to their arsenal to help them in the battle for talent? 

How about a killer employee benefits package that outshines the competition? And one that doesn’t require deep pockets, just a different way of thinking.

Employee share schemes

The benefit we're talking about is an employee share scheme, 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.

Drop us a message in the comments if you’d like a copy of the guide.

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, feel free to book a call to find out more.

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.

This article first appeared on the Vestd blog.