It has long been attractive to employers to set up specific schemes to incentivise, motivate,  remunerate and retain their employees or key personnel.

Employee solutions cover a number of areas but can generally be broken down into three main categories - consultancy companies, Employee Benefit Trusts and offshore employment & payroll solutions.

Consultancy companies

 International entrepreneurs, professionals and skilled individuals often contract their services through their own consultancy company. In an increasingly international and mobile business environment individuals have contracts with a number of companies and countries other than their home territory. It therefore makes sense both practically and for tax planning reasons to establish their own consultancy company.

The Consultancy Company contracts with a third party to supply the services of the individual employee. Being established and administered from a low tax jurisdiction means the Consultancy Company pays no corporation tax whilst the employee is able to benefit from deferring or sheltering income tax. In addition a fully managed consultancy company can give an individual a greater presence when negotiating contracts with third parties and back office support from company administrators allow the individual to concentrate on the contracted task. 

Employee Benefit Trusts ( “EBT”)

EBT’s have been used for many years as a way of attracting, retaining and motivating key personnel in a tax efficient manner. EBT’s are established by the employer and range from schemes for just a few employees or executives to an extensive offering for all employees over a number of locations and jurisdictions for multinational companies.

EBT’s are administered in accordance with a Trust Deed and an EBT plan which sets out the rules, benefits and operation of the Scheme. In essence they can be as complex or simple as the employer wishes to make them and are by their nature very flexible.

In most schemes the employees benefit from either being able to receive interest free or, interest bearing loans from the scheme and/or being able to participate in share option plans. Through the EBT, the employee can be granted options to subscribe for the shares under specific terms and conditions. It can also be a mechanism for holding company shares and for being able to buy or sell private company shares when there is no liquid market for those shares.  

Offshore Employment & payroll solutions

Where it is not practical for a person to own their own consultancy company or where an employer wishes to employ staff outside their home jurisdiction then the use of a third party Employment Company may well provide a solution.

The Employment Company has the benefit of providing employment services in a cost and tax efficient way. The employee should benefit from lower taxes but also has the added benefit from having an employment contract and other protections, such as health insurance, death-in-service, pensions, and other benefits. The Employment Company is able to provide tailored employment contracts to take account of the employers and employees requirements and then administer the contract in accordance with those terms.