How Can Private Companies Incentivise Employees in 2022 and Beyond

PUBLISHED: 5th October 2022

There is no doubt that the last two years have been challenging for businesses and their employees for many reasons.

The short to medium term economic outlook is somewhat uncertain.

Private companies can struggle to attract and retain key talent when competing against public companies with deeper pockets and generally perceived more attractive incentive arrangements. 

Workplace Trends

Employees attitudes to work are changing and there has been a shift in employee expectations and priorities.  Employees now place greater value on matters such as diversity, health and wellbeing, work life balance, flexible working hours and remote/hybrid working.

A more recent trend is emerging whereby the length of time that Generation Z and millennials generally remain with one employer is significantly less than previously experienced by employers and such generational based trends can cause havoc with employee retention.               

What should private companies do now?

Employees will continue to be motivated by financial and equity-based incentives and employers need to figure out a way of recruiting, managing and retaining a multigenerational workforce into the future.

Employers should examine their current remuneration and incentive models and consider whether they are fit for purpose in the current climate and beyond.  What might have worked a few years ago may not necessarily work now due to the changing business environment and work practices.

Obviously, employers will need to consider the needs of the business and ensure that any new or adapted incentives strike the right balance between such the needs of the business and its employees.

If the current remuneration and equity incentive models are not working or are at risk of not working going forward, then employers should engage with tax and legal advisors to establish what tweaks if any can be made to their current bonus and share schemes.  Employers should ask themselves it is worth exploring new schemes which might be more aligned to the current and future growth of the business and staff retention objectives.

What if a private company does not have any share-based remuneration?

Whilst some private companies do not consider equity-based remuneration appropriate for their particular business model there are incentive arrangements which can be implemented which do not involve issuing equity to employees but can track the future growth of the business and are worthy of consideration.

Conclusion

There are many equity incentive arrangements available in Ireland and there is no one size fits all approach.  It is important that the board of directors of a business take a pro-active approach to regularly monitor employee incentives offered to employees and take appropriate action to reflect the current business environment and employee trends.  Professional legal and tax advice should always be taken by a company when considering amending any current share-based remuneration or introducing any new incentive plan to ensure the most appropriate incentives are in place for the relevant business and such incentives genuinely incentivise and retain key employees.

For more information please contact Gillian Dully at gdully@lkshields.ie.