Communicating the benefits of an EMI to your employees

When you’re launching an Enterprise Management Incentive (EMI) scheme, you’ve got a lot to focus on. But eventually, you get to a point where it’s ready. The EMI has a launch date. It’s exciting – not just because it’s the result of a lot of hard work, but because an EMI scheme is a great reward programme, delivering a real reward for employee efforts.

But the thing is – you know that, but do your employees? An incentive is only an incentive if they understand it.

So, now that your EMI is ready to go live, your work has only just begun. It’s time for the next step – communicating the scheme to the rest of the company.

Communicating the real benefits of an EMI

The tax advantages of an EMI are numerous, but people generally aren’t incentivised by vague terms like ‘tax advantages.’ So, what do you do? Do you spell out the advantages an EMI scheme brings? Let’s try it:

With an approved EMI scheme, the employee is granted options at market value. If the market value increases dramatically over time, the employee still is only required to pay the original market value, without an income tax charge.

Does that sound enticing? Sure, the information is incredibly exciting – that’s a great deal for the employee – but it doesn’t exactly drive the imagination into overdrive. How about this:

The employee will have to pay some tax when they exercise the options, but it will be Capital Gains Tax, which is a much lower rate than Income Tax.

It’s better, but it’s still very vague. You want your employees to be driven, motivated by a great reward, not working out the percentage points of Capital versus Income Tax.

So, how do you communicate your EMI in a way that will drive enrolment and result in genuine engagement and enthusiasm from your key employees? It doesn’t have to be hard. You just need to find your elevator pitch.

The Elevator Pitch

Communicating the concrete benefits of an EMI to employees is crucial

The ‘elevator pitch’ is an important tool in any sales toolkit. Used well, and crafted carefully, it can be the deciding factor between an empty inbox and a full calendar. But how do you write a great elevator pitch?

An effective elevator pitch uses a sort of shorthand. It takes something the audience is already familiar with and uses it as a framework.

For example, how do you convince a movie producer to make the movie, Alien; a movie that relies heavily on the iconic imagery or performances, before a single sketch is made? Simple. Use an elevator pitch: Jaws, in space. Everybody knows Jaws, and what kind of movie it is. They also know it was incredibly successful. This pitch lets the existing idea do the heavy lifting.

Obviously, your EMI scheme won’t be as simple to distil into three words. But you can use the basic idea.

Make it concrete. Make it familiar. And make it interesting.

Making it concrete

EMI Options are a great benefit. The options have basically unlimited value – the share price can go higher and higher. And that’s great in theory, but it is a bit vague in terms of motivations. It’s hard to daydream about spending ‘potential.’

So, make it concrete. This is where a dynamic cap table tool comes in handy. Take scenario modelling – it’s not just for investors. It’s great for you to see how different investments will impact your company, but it’s also interesting for your employees (within reason, of course). Show them a few scenarios, and what it looks like for their bottom line, for their reward. Suddenly, the EMI is a lot more concrete.

You can also compare the EMI to an old cash bonus scheme directly. After all, an EMI scheme is really just a new way – a better way – of executing an old idea. People understand cash bonuses. They might not be the best way to reward people, especially after-tax, but their simplicity is appealing.

Show how much more money the employee stands to gain from the EMI, compared to a traditional cash bonus. (For example: ‘Sure, you could have a £2,000 bonus, but with an EMI, if the share price rises X points, you can have triple that, without Income Tax.’)

The most important thing to remember is that an EMI is a great scheme – you don’t have to spin it or flatter it, it can stand on its own. Your employees just need to understand it, and they’ll be convinced. So, tell them what they want to know, in a way that they can understand.

Now you’re ready – what’s your elevator pitch?