Government announces temporary changes to Employee Management Incentive (EMI) legislation from 19 March 2020 to 5 April 2021.
On the 3 April 2020 we reported that it was unclear what impact furlough leave would have on employee’s EMI (Employee Management Incentive) share schemes.
There was some concern that an employee on furlough would fail to meet the working time requirement for EMI purposes, as the rules set out that option holders must work at least 25 hours per week or if less, 75% of their working time. The government has now announced temporary changes to the EMI legislation with effect from 19 March 2020 until 5 April 2021 to ensure furlough leave does not affect option holders meeting this criteria. It also includes a provision for this change to be extended for a further 12 months if the disruption caused by Covid-19 has not ended by April 2021.
The changes mean when calculating the employee’s ‘committed time’ for granting an EMI option, any time when the employee was not required to work for reasons connected with Covid-19 will still count as working time. Likewise when determining if a disqualifying event has occurred, any time that the employee is not required to work for reasons connected with Covid-19 will also count as working time.
It comes as a relief to option holders who have an EMI scheme as it confirms that they will not suffer a disqualifying event, nor lose tax advantages as a result of being furloughed. It also means that companies can still use EMI schemes to incentivise staff and reward loyalty.
If you need guidance in relation to an EMI option scheme then please contact Lucy Gleisner at Trethowans on 023 8082 0539