How EMI schemes can help your business retain key employees

‘Mass Resignation’, a large wave of employees leaving their jobs in unprecedented numbers over the past few years.

Since the pandemic, many people have reevaluated their priorities, seeking a better work-life balance, more meaningful roles, flexible work opportunities and growth. This trend shows no signs of slowing and reflects a broader shift in generational expectations in the workplace.

This wave has impacted businesses of all sizes, but smaller companies, especially those operating in more specialized fields, can feel the impact to a much greater extent. Finding and retaining the right people has become one of the biggest challenges for SMEs. Losing talented employees can disrupt growth, impact the consistency of the entire business, and create gaps that are difficult to fill.

What’s the solution?

Nothing is a guarantee, but there are some tried and tested ways to give your team a stronger reason to stay motivated.

One of the most effective tools is the EMI (Enterprise Management Incentive) scheme. This is a government-sanctioned stock option scheme, which allows companies to grant selected employees the right to purchase company shares in the future at a discount (or even the current price).

By giving employees a share in the business, this gives them more incentive to contribute to the company’s growth and hopefully survive in the long term. This incentive is not something that is easy to give up. If the value of shares increases, employees can make significant profits after selling them.

Can’t I just grant regular stock options? Why is it tax efficient?

You can grant normal (unapproved) share options, but EMI options are specifically designed to make employee ownership more tax efficient for both the business and the employee – so why not opt ​​for EMI if you can?

Based on unapproved schemes:

• When exercising their choice, employees must pay income tax and NICS at rates up to 45%*.
• For sale, CGT up to 24%* will be payable based on Market Value, minus the amount subject to income tax.
• A CT deduction can usually be made for a company, based on the amount of income tax charged to the employee.

Under EMI scheme:

• In exercising their option, if exercised within 10 years of grant award, with no disqualification event, and no discount on grant award, there will be no income tax or NICS when exercising.
• CGT is payable on the sale of the shares, but only up to 24%* (with the potential to claim a lower interest rate of 14%** Business Asset Disposal Relief, with less stringent terms under EMI).
• A CT deduction can usually be made for a company, based on the difference between the market value when the shares were acquired and the amount the employee paid for the shares.

*based on current rates in October 2025

**may increase to 18% from 6^th April 2026

How does my business manage this?

Before granting stock options to EMI, a company must first ensure that it meets the eligibility criteria. The company must be an independent trading entity with gross assets of £30 million or less and fewer than 250 full-time equivalent employees. There are also provisions relating to the employees themselves, so it is important to engage a qualified tax advisor to ensure compliance before proceeding.

Although there is no formal HMRC approval process for EMI schemes, a share valuation can be agreed in advance. This is an area where experienced advisors can add value, helping to reduce risk and ensuring schemes are structured effectively.

Companies are required to notify HMRC within 92 days of granting an option, and there are also annual reporting requirements to maintain compliance.

You will need to consult a lawyer to help draw up relevant legal documentation, such as option agreements, to ensure the scheme is legally sound.

Does this suit my business needs?

One of the biggest advantages of EMI schemes is their flexibility. Its structure can be tailored to business and workforce objectives, allowing it to become a powerful retention and motivation tool. For example:

• That number of options or execution time can be linked to individual or company performance targets.
• Practice maybe associated with a particular event or achievementensure alignment with company growth objectives.

In short, EMI schemes can be designed to suit the unique needs of each business, providing a tax-efficient way to reward and retain the employees who are most critical to its success.

The next step

If you are looking for a way to retain key employees and reward their contribution to your business, an EMI scheme could be the solution. If you would like to find out more, please get in touch.