Alysoun Stewart of Grant Thornton writes:

The success of companies like John Lewis is down to several factors and a deeply embedded culture. Employee participation is just one component. If you want to bind in your employees for the long-term, there are several mechanisms to consider. Equity participation is one. The Enterprise Management Incentive (EMI) scheme allows you to do this tax-efficiently. You’ll need professional advice to set it up and should also bear in mind that for most employees, holding shares will be a meaningful incentive only where there is a defined route towards the realisation of the value in those shares. The scheme is, therefore, most often used where there is a clear exit strategy and the objective is to incentivise senior management towards the achievement of the exit value and to enable them to have a share in the disposal proceeds.

It may be, however, that you are seeking to provide your employees with a regular share in the profits of the business as part of their remuneration package, to increase loyalty and enhance performance. The potential pitfalls here are around the clarity of your aims and your ability to structure a scheme that will be aligned with those objectives. Think about the type of company culture you wish to create, the kind of people you employ, and what reward they will value most. Then be clear about what you want from them in terms of performance and loyalty.

There are many ways of achieving profit sharing, from a profit pool that is distributed at regular intervals, to flexible benefits or working patterns to accommodate employee needs. All should be considered to arrive at a menu that meets the criteria that you’ve set.

The prize for getting it right is the equivalent of a sprinkling of fairy dust, but it comes as a result of hard work and careful thought, not the wave of a magic wand.

Alysoun Stewart is head of the Entrepreneurial Advisory Services group at leading global accounting, tax and business advisory firm Grant Thornton. www.grant-thornton.co.uk