Local companies could be missing out on a tax efficient way to reward and retain key employees, warn a leading firm of chartered accountants.

Enterprise Management Incentives - or EMIs - are a flexible share option scheme introduced last summer with small and medium-sized companies in mind.

Most trading companies with gross assets of below £15m can now establish EMIs for all key members of staff - and receive tax relief on the cost of setting up the scheme.

EMIs give participating employees the option to buy shares in the company - options which can be exercised three to ten years ahead. Directors can also be granted options.

Raftery partner John McDonald said:

"Companies which take advantage of the scheme could find it helps both recruit and retain high-calibre employees.

"It may also motivate employees to contribute further to the success of a company in which they have a financial stake and it enables employers to effectively remunerate key staff in a highly tax efficient way."

The schemes are open to those with less than a 30 per cent share holding in the company. The price of shares is set at the time the option is granted with no obligation for the employee to exercise the right.

If the share value falls they therefore need not buy - if it rises they have made a profit which attracts tax advantages.