Our region, and Cambridge in particular, is blessed with a world class technology sector with a range of companies from international renowned behemoths to exciting start-ups.
A common factor across this spectrum of success has been the ability of the major players to embrace employment policies beyond the norm, particularly in the nature of their incentives and share offerings, and most importantly their ability to attract and retain an international workforce. HR professionals in technology must embrace knowledge beyond statutory employment law to include an understanding of complex immigration rules and procedures, along with a commercial understanding of share and other employee incentives.
Immigration need to know
Currently EU nationals can work in the UK without restriction. The government has stated that following Brexit, it wishes to impose controls on immigration from Europe. However, Theresa May has acknowledged that employers will need time to adapt and so instead of a 'cliff-edge' there should be a two year transition period.' During this time EU nationals will be able to come and work in the UK, but will need to register their presence here. After this, it is likely that restrictions in some form or another will be imposed.
However, the ability to recruit EU nationals is not only driven by legislation, but by the practical reality of whether they wish to come and work in the UK. We are competing internationally for skilled workers and unfortunately the current climate has led some to prefer to make their career elsewhere. Whilst technology companies are certainly not pulling out of the UK, many are strengthening their overseas offices in anticipation of these being more attractive destinations for key talent in the future.
Meanwhile, non-EU workers can still be hired using the Tier 2 visa scheme. The cost of this increased from April 2017 due to an ‘immigration skills charge’. For large sponsors, this is £1,000 per year of the visa. For small sponsors and charities the charge is reduced to £364 per year. The government wants
to encourage employers to train more local workers, by increasing the cost of recruiting from abroad whilst generating more funding for apprenticeships.
All of this may make it more difficult to attract the right quality and number of employees to sustain the growth seen in the last decade, so what else can be done?
Incentives need to know
Offering share incentives has been a powerful tool for technology companies and remains so. It has fast become the norm and an expected part of the remuneration package. Share schemes help attract and recruit the best candidates, particularly in the early stages, high growth companies where cash is tight and bumper salaries are not an option. Employees with shares or share options are more likely to align their ideas and interests with the other shareholders and remain incentivised for the longer term.
The right scheme depends upon a number of factors; the shareholders’ aims, the corporate structure, whether direct share ownership is desired (an employee holding shares from day one), or whether a share option is preferred (the right for an employee to acquire shares at some time in the future on conditions). Communication with an employee is key because it is of little incentive if the employee doesn’t understand and/or value the benefit being given. Share schemes can also be a tax-efficient way of remunerating employees.
Most notable for technology companies are Enterprise Management Incentives (EMI schemes/options) - an HMRC tax-advantaged share option scheme.
Providing the company and employee meet qualifying criteria, employees can be granted EMI options over shares worth up to £250,000 at the date of grant. EMI schemes are highly flexible and allow for voting restrictions, forfeiture provisions and vesting and performance conditions, and providing certain conditions are met, allow employees to benefit from the growth in value of a company in a very tax efficient manner.