Employee Incentives for the Recruitment Sector

Looking beyond salary and commission – How to incentivise your best people

Most recruitment businesses already have a blend of salary, bonus and commission in place.

For many teams that works well. But when you are looking to retain a small group of pivotal people and keep them focused on the longer-term value of the business, you often need something that feels more substantial than a marginal uplift in annual pay.

Equity-based incentives, or equity-linked alternatives, can sit alongside the reward structures you already have. They give key individuals a clearer connection to the value they are helping to build and a stronger reason to stay for the next stage of the journey.

For recruitment businesses, three tools tend to come up most often in practice.

• EMI options
• Growth shares
• Phantom share schemes.

 

WHY EQUITY HAS BECOME PART OF THE CONVERSATION

There are a few reasons these conversations have moved from being occasional to becoming more mainstream.

First, many owners are focused on building a stronger team for the medium term, not just delivering the next quarter. Second, the market remains competitive for the best billers and leaders. Third, more businesses are thinking about succession and future exit routes, even if that exit is still some years away.

Equity and equity-linked incentives help because they connect reward to business value rather than only individual performance.

 

EMI OPTIONS

Enterprise Management Incentive (EMI) schemes remain the most widely used share option route for qualifying recruitment businesses. At their simplest, EMI options allow selected employees to buy shares in the future at a price fixed today, usually today’s market value. If the business grows, the value uplift is enjoyed by the option holder when they exercise and eventually sell their shares.

The tax treatment is a significant part of the appeal. There is no Income Tax or National Insurance on grant. If the option is granted at market value and the scheme conditions are met, there is generally no Income Tax or National Insurance on exercise either. The employee then pays Capital Gains Tax when shares are sold.

For the company, there can be a Corporation Tax deduction on exercise, broadly based on the difference between the market value at exercise and what the employee pays.

Who qualifies 

The headline conditions for EMI are well established. A company can offer EMIs if it has gross assets of £30 million or less and fewer than 250 full-time employees. The employee must work at least 25 hours a week or 75 per cent of their working time for the business.

The Autumn Budget changes are important for 2026 planning especially for larger corporates who previously didn’t qualify for EMI schemes. For EMI options granted on or after 6 April 2026, the company-wide option limit increases from £3 million to £6 million, the gross assets limit rises from £30 million to £120 million and the employee cap increases from 250 to 500. The maximum exercise period is also extended from 10 years to 15 years. The 15-year change can apply to existing unexercised options as well, with amends permitted without losing the tax advantages, as long as they are in line with the legislation.

What to consider

In our experience, EMI schemes work best when the commercial story is clear and credible. The fastest way for an EMI plan to lose impact is when it is linked to an event that employees do not believe will happen. If an owner has no intention of selling, an exit-only trigger can feel like a hollow promise.

It is also worth remembering the independence requirement. Options cannot be granted by a company that is controlled by another company, so group structures need careful review before anything is implemented.

 

GROWTH SHARES

Growth shares are often attractive for more established recruitment firms. They allow owners to bring key people into the shareholding structure without giving away value that has already been built.

In a typical arrangement, existing shareholders keep the current value. Growth shareholders then participate only in value created above an agreed hurdle. This can be a strong fit where the business has a defined growth plan, such as building a new vertical, launching an international desk, or creating a new service offering.

 

PHANTOM SHARES

Not every owner wants more shareholders. Sharing equity can be a big step. It can introduce longer-term expectations around governance, decision making and how value will be shared in the future. Some owners are comfortable with that. Others prefer to keep the shareholder structure simple while still finding a way to reward and retain key people.

Phantom share schemes offer a different route. They are cash-based plans designed to mirror the economics of equity without issuing shares. Participants receive awards that track the value of the business and pay out when agreed milestones are met or on an exit.

For employees, this can still feel like a genuine stake in the future success of the firm. For owners, it preserves control and avoids share dilution. The trade-off is that payouts need to be funded in cash, so affordability and tax treatment should be considered early.

 

PULLING IT TOGETHER FOR 2026

Long term incentives can be a strong way to retain and motivate the people who will shape your next phase of growth, but they only work well when they are properly thought through and aligned with how you want the business to evolve. The expanding qualifying criteria from 6 April 2026 is a useful prompt for larger, more established agencies to revisit whether an EMI scheme is now a realistic option.

It is also worth noting that incentives are rarely the reason great people stay. More often, they reinforce something that already feels true inside the business.

If you want to retain top talent, financial rewards alone won’t be enough. People stay when they feel valued and empowered. They need a voice in the conversation. They need to feel trusted, heard, and involved in shaping the future.

True engagement comes from ownership and responsibility—not just tasks, but decisions that matter. Give them the chance to influence strategy, take real accountability, and build something meaningful. These opportunities can be as powerful as equity itself.

The most effective approach is often a combination of both. A well-designed long term incentive that aligns people to future value, alongside a culture that treats them like future leaders today.

 

Recruitment Sector Outlook 2026

For more guidance, insights, and articles on the recruitment, download our 2026 Recruitment Sector Outlook.

You’ll find practical guidance on international expansion, long term incentive plans, tax updates, marketing tips, operations developments and M&A insights, as well as thought leadership from networks and advisors who spend their time in and around recruitment boardrooms.

Download Recruitment Sector Outlook

The Recruitment Sector Outlook is produced by Recruitment Accountants, a division of TC Group.