Why should recruitment companies consider equity incentives?

17 June 2022

Driving growth in the recruitment sector

Recruitment companies are continually looking for ways to drive their businesses forward. As people businesses, the key to the success of any recruitment company is the hiring, retention and incentivisation of talent.

Attracting, retaining and motivating talent in recruitment businesses

Reward in the sector is typically driven by short-term, cash-based performance bonuses, aligned to sales. If designed and communicated effectively, these can successfully drive performance and, of course, exceptional billers deserve to earn well. However, they do not always assist with attracting, retaining and motivating key individuals, who can create value by helping to drive long-term growth.

Many recruitment businesses we work with are, therefore, now supplementing traditional bonus schemes with carefully focussed equity incentives, which encourage individuals deemed critical to the future success of the business to buy into the long-term journey. It also aligns their interests and rewards with those of shareholders. The employee, therefore, has a stake in the business and an opportunity to grow personal wealth.

How equity incentives can support the growth of your recruitment business

To be effective, it is critical that equity incentives are designed carefully to ensure they fit with the company’s strategy and the outcomes desired by shareholders. Shareholders are often, understandably, reluctant to see their holdings diluted. However, we often structure plans to protect the current value of the business for existing shareholders, whilst entitling senior employees to share in the future growth of the business in which they will play a significant part.

Not only does this improve recruitment, buy-in and incentivisation, it focusses the management on the growth of the business and can be extremely tax efficient. Bonus schemes carry tax and national insurance costs of up to 63.3 per cent, whereas equity incentives can deliver rewards to staff at tax rates as low as 10 per cent.

Please speak to us about how we can help you shape an incentive arrangement to drive the next stage of growth in your business.