Member Article

Employee Benefits - What does Daddy do?

My children like most young children, struggle to understand what I do for a living. They think I am simultaneously an explorer (because I have mountains of paperwork to conquer) and superman (because I always have to fly). Fortunately I reckon I have a good few years yet before I am rumbled on the superman front. Unfortunately I have come to realise that it is not just my children who are confused about my work, adults are too.

Clients, colleagues and contacts variously refer to me as: a remuneration consultant, an incentives lawyer, an employee benefits adviser, a share plans expert, a tax guru and a pension techie. Personally I quite like the idea of being called a “reward raconteur”. The trouble with that (similar to the superman sobriquet) is that I am bound to disappoint down the line.

All of the above are of course correct but you can see why a single title struggles to capture the multi-faceted nature of employee benefits - it is a distillation of separate disciplines: employment, HR, pensions, reward, tax etc.

Titles, do not help to define what I do.

In a recent meeting with a CEO of a growing technology company, he said to me: “I have no idea what an employee benefits lawyer is”. To which I replied: “neither do I, but what I can do is give you an idea of how I help companies like yours”. Once I had explained how I could help he instantly got it and me. The following is an expanded version of that explanation.

“I help companies like yours in two main ways. First, I can review all the ways that you, as a shareholder and director of a limited company can take remuneration tax-efficiently from the company, including by way of perks and benefits in kind. Second, I can help you to widen the tax planning net to benefit those who are employees but not shareholders, of the business. This is predicated on the fact that whatever benefits employees (especially key or senior employees), typically benefits the business as well. Have you heard of alignment of interests? How about EMI? No? It is the Rolls-Royce of tax-efficient shareholding and a powerful motivational tool. We can talk about that later.

For now though, whether I am talking to big quoted companies or to private limited companies like yours, I always ask the following question:

‘Do you want the earnings of those who work in your business, whether they are shareholders or not, to be paid with minimum tax and national insurance leakage?’ Invariably the answer is yes but sometimes it is no. Sometimes, the tax tail does not wag the commercial dog and the company prefers instead to focus on reward structures that are more closely aligned to creating shareholder value, that increase employee engagement with the business or which encourage better cooperation between management and employees.

That is how I help, that is how I add value. Sometimes that value is very visible (tax is saved), sometimes it is less visible (an employee performs better or does not leave or external shareholders do not vote the structure down) but in all cases for all companies, helping them to solve the conundrum of effective employee recruitment, retention and incentivisation is what I do for a living.“

I’ll just go and get my cape.

Nigel Watson is a partner at the law firm Brodies LLP. He specialises in employee taxation, reward structures and share plans. If you would like to know more about the contents of this article, please email nigel.watson@brodies.com

This was posted in Bdaily's Members' News section by Nigel Watson .