14 human resources


SMEs are failing to prepare for the future


Chris Goulding, director at Hays, discusses the implications of poor succession planning for the Thames Valley's SMEs


Succession planning is a growing concern for all businesses, but it’s the SME sector which runs the risk of failing to prepare for the future as worries about cost, wasted time and internal politics are all causing major stumbling blocks.


Without a plan in place, the departure of a key figure within an SME can have significant consequences, with a smaller talent pool to find a replacement from. This has wider implications for the economy – with two thirds of all new jobs created between 1997 to 2007 in companies with fewer than 50 employees. the importance of the SME sector in the UK is all too evident.


Lining up the next generation of leaders to run an organisation


can ensure that a company continues to thrive, but many SMEs are failing to focus on this business critical issue due to a number of factors.


Many SMEs point to the lack of financial resources to tackle non-immediate concerns like succession planning, as well as the burden of extra work and the lack of a dedicated people management resource.


You don’t need a large HR department to address the challenge of succession planning though. Leaders and managers can answer some basic questions to put the business in a better state of readiness.


They need to ask themselves, which roles are critical? What


Remunerating your employees


Remuneration packages for small companies are not just based around salary and may also include benefits such as pension contributions, medical insurance or a company car, writes Peter Jones, senior tax manager, of Griffins


An effective way of attracting new employees to the business and/or securing commitment of existing employees may be to give them the opportunity to benefit from the future success of the company by holding shares.


For an SME, one of the most tax efficient ways of achieving this is by setting up an Enterprise Management Incentive (EMI) scheme.


An EMI scheme is a form of company share option plan, approved by HMRC under which you are able to grant options to one or more employees, giving them a right to buy a certain number of shares at a fixed price at a particular time.


The option can specify the point the options may be exercised; this may be after a certain period


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of time, upon achievement of certain performance criteria or upon the happening of a future event.


EMI options are extremely flexible and different exercise dates and conditions can be given so long as all shares are capable of being exercised within 10 years of the date they are granted.


Once the options have been exercised, the employee will own shares in the company and is therefore a shareholder with the right to receive dividends when declared.


In addition, if the


company continues to grow, the value of the shares also grows in the employees hands, increasing the capital value to them.


There are a number of conditions to be met by both the company and individual to


qualify under the EMI scheme. It is also important to ensure that a valuation of the shares is undertaken and agreed with HMRC in advance of implementation.


The main tax advantages of an EMI scheme are that income tax is not due on either the grant or exercise of the option; provided that the price paid on exercise is not less than the market value at the time the shares were granted. On the basis that the company is increasing in size and value, this will often mean that the employee will be acquiring shares with a higher value than that paid.


In addition to the Income Tax advantages on offer, on a sale of the shares, the employee will pay capital gains tax at a rate of just 10% on the basis that they meet


THE BUSINESS MAGAZINE – THAMES VALLEY – JULY/AUGUST 2013


certain conditions at the date of sale.


We would be happy to help if you are considering such a scheme.


Details: Peter Jones 01635-265265 p.jones@griffins.co.uk


capability exists in them right now? Who are the potential successors?


Whatever the business, succession planning can seem like an unnecessary and uncomfortable chore. However, avoiding these occasionally difficult decisions will only create greater risk as the company grows and matures. With that in mind, in many ways, the key to succession planning is just to start.


To discuss these issues in more detail contact Chris Goulding or Hays in Reading.


Details:


Chris Goulding 07912-073940


Hays Reading 0118-9070321


To read more about succession planning for SMEs in the latest Hays Journal, and to request a free printed copy, visit www.hays.com/haysjournal


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