10 Reasons Recruitment Consultancies are using Share Schemes

RM2 acts for companies in a wide variety of sectors. However, recruitment companies will often come to us to look for ways to structure equity incentives for their employees. These include executive, specialist IT & technical, property, tax and company secretarial, graduate and cross-sector recruitment.

Recruitment companies have specific characteristics which make an equity-based scheme particularly attractive. Their business model is extremely people-focused, and remuneration is traditionally commission heavy with potentially very lucrative returns for the best agents. Quick returns for excellent individual performance can be a positive driver in many ways but an over-reliance on this approach can sometimes result in a lack of focus on the long-term performance of the company as a whole, and a tendency for individuals to work for themselves rather than as part of a team. Furthermore, in a fastmoving and highly competitive marketplace, top people can be lured away by the promise from a competitor of bigger bucks now, or by the attraction of setting up their own business in direct competition.

These can be real challenges for a recruitment company looking to maintain value and build in the medium to longer term.

Our recruitment company clients have all recognised these challenges and have moved to implement a scheme to encourage long-term retention of key staff.

Here are ten reasons why they choose a share scheme:

1. Cash free motivation tool – granting share options or awarding shares keeps ready cash in the company;
2. Long-term rewards encourage retention of keen employees;
3. May help reduce poaching by competitors;
4. Broadens the focus on all divisions and teams within the company or group;
5. Broader focus may help promote cross-referrals among teams;
6. Facilitates succession for owners seeking to exit in 3-5 years;
7. If key employees can share in company-wide profits and capital growth, they have less incentive to set themselves up as a competitor;
8. Allows longer-term focus on corporate growth instead of short-term, unsustainable results;
9. Tax efficiencies for employees and the company;
10. Allows non-executive directors to be paid partly in shares instead of cash.

If you think a share plan might help you meet the challenges in your recruitment business, call us on 020 8949 5522 or email us via enquiries@rm2.co.uk and arrange a free consultation.