Due to the increased availability of employment opportunities in certain sectors, employers are looking for more innovative ways of retaining key talent. Family businesses in particular are looking at ways to stand out with incentives for their staff that are comparable to multinationals. Having and retaining key talent in the right places and at the right time are factors in the future growth ability of the business. Equity was typically seen as a central incentive, but employees are looking more to the whole remuneration package on offer.
Keeping talent is more difficult in today's environment. More opportunities exist for employees and as a result of Covid there are increasing opportunities for employees to work remotely for foreign based companies. In addition, the range of incentives being offered is increasing. Family businesses are realising they need to be innovative with their reward packages to keep their key staff.
Often, family businesses need to stand out for the values and vision that they stand for. That can be difficult if the right package is not available to retain and reward their talent.
Businesses need to incentivise and reward staff through the use of equity and non-equity benefits.
Studies have shown that employee financial participation can be an important factor in contributing to the success and growth of a business. Employees with equity get a real sense of ownership in the company and would be motivated to ensure their investment is a success.
Equity may bring a tax incentive to the table for a key employee. It may be possible to achieve Capital Gains Tax rates at 33% on an exit. This is often seen as icing on the cake for the individual.
The equity offered to an employee would depend on the life cycle of the company, the growth aspirations of the business, and the key employee involved.
Many family businesses find themselves in a battle to retain their key staff as equity is not always something that can be offered. Most family businesses are committed to staying owned by the family and see the next generation taking over the business. They would tend not to consider an exit. As a result, equity is not always something that is appropriate for a family business.
Other incentives can often depend on the employee, the job and the nature of the business. There is no one incentive that fits all. Other incentives can be broken down into financial rewards and benefits and perks of the job.
If equity participation is not possible, the family business could look at a plan which does not give actual equity but allows the employee to share in any upside of the business when a dividend is paid.
Bonus plans which are based on the performance of the business over the next couple of years have also proven to be successful. This allows the employee to share in any upside of the business where dividends may not be paid on a regular basis.
Pension plans can provide stability for the employee when they retire and can be an important factor for many employees when planning for their future.
Employees are looking for not just financial rewards but also the benefits that a company can offer.
For a family business, often this could be building and communicating what a family business means and why it would be good to work for them. Increasing the awareness of the values of the business should in turn increase the sense of a community feel to the company and something which a key employee may wish to be part of.
Other perks of the job could include work/ life balance, social and corporate responsibility within the community, flexible working arrangements.
Has the vision and values of the family business been effectively communicated to the employees and wider community? By increasing awareness of what the business stands for, key talent will understand and believe what the business stands for.
Does this package adequately attract the person for the job that you need? It is important to ensure that the package is suited to the position of the job (whether managerial or technical) so that it’s in line with other similar roles.
Has information been clearly communicated to all levels of the business? This could play an important role in maintaining key talent as employees as the employee would feel a sense of involvement.
As the family business sector continues to grow, it is important to ensure that you have the right people in the right job at the right time. There’s no doubt that the weeks, months or even years ahead could be challenging. However, the priority now is to ensure that your business can progress and succeed in this ever changing environment. We can make that a reality in your family business. Contact us today.
Director, PwC Ireland (Republic of)
Tel: +353 1 792 6449
Senior Manager, PwC Ireland (Republic of)
Tel: +353 1 792 5557