How do you attract talent into the life sciences sector? What can you do about the skills gap in this industry? As you might have guessed life sciences sector is one of the few sectors which has done well in the pandemic, largely on account of the ongoing work developing vaccines. As Beauhurst reports, around 53% of life sciences start-ups are at low risk of closure compared with an average of 42% across all sectors, whilst an impressive 26% are potentially positively affected. There have been no permanent closures.
Lifescience Industry magazine covers news of sector growth and reports that Boyds is expanding again. Boyds is a leading pharma and biotech product development business and turnover has surged by 25% percent as demand for its specialist services continues to grow. It is now launching a recruitment drive creating up to 10 new roles to enhance its expertise and expand the business. Many others in the sector are doing the same.
However, the snag is recruiting the talent. The skills gap is a problem and it’s analysed in an article which has featured in Outlaw. The message is that businesses should be looking to diversify their workforce and recruitment pool and, to that end, it’s argued there are three key issues to address. First, diversity, so creating an inclusive culture where people feel a sense of belonging and are able to bring their whole selves to work. Second, immigration, so making sure there is a route into the UK for that talent. Third, incentives, so offering the rewards that will attract and retain those people.
Incentivising talent is what we will focus on now. It’s obviously important in a sector that’s growing, but what does it actually amount to in practice? To find out I phoned reward specialist Fleur Benns, who is one of the authors of that article and argues why offering share options as part of an overall remuneration package is worth considering, especially for start-ups:
Fleur Benns: “I think share options are particularly good for the smaller start-up companies who actually struggled to pay the highest salaries that larger, more established companies can pay. So to attract those key employees that they need to grow, they need to be a little bit more creative in the sort of remuneration packages that they offer and where you have such high growth, start-up companies, where value can increase in the short to medium term as you work towards an exit, actually share options are really attractive because they offer the potential of quite substantial capital gains, rather than a set higher salary. So, there is that offset that that makes them particularly attractive in those types of company.”
Joe Glavina: “An example you talk about in your article is the EMI share option which is tax advantaged which makes it attractive. And it’s not risky.”
Fleur Benns: “No, options are a sort of a risk free investment opportunity for employees. They are a ‘wait and see’ opportunity for employees. So an employee does not have to exercise the options so that they can sit on them, particularly with the EMI options where you don't need to exercise but still have your capital gains tax treatment, the employee can be granted the option and they don't need to exercise it and they just wait until there's an exit event such as an IPO or a share sale, and then determine, at that point, whether they want to exercise their option. So, it is really risk free for the employee.”
Joe Glavina: “The risk profile of tech start-ups is very well documented - many fail - but these share options are a safe bet would you say?”
Fleur Benns: ”Yes I would. It is that no risk investment profile, combined with the capital gains tax treatment on potentially a very large gain in respect of those shares. Obviously, there is that risk factor that the company might not be successful but these companies when they are successful tend to be very successful and, therefore, employees can see large gains.”
Joe Glavina: “Interestingly this issue has started appearing quite a lot in the sector press. I notice one of the other arguments in favour of share options is their appeal to outside investors. So, they say share options are likely to be well-received because they indicate a recognition by the company of the importance of retaining its key personnel. I guess you agree with that?”
Fleur Benns: “I do agree with that. It shows that the founders, or the board, have really thought about how they're going to attract and retain these key employees. Options can be granted subject to vesting so, again, there's generally time vesting, so you have to stay with the company until that exit event in order to take up that full benefit. It's also subject to leaver provisions so you might lose those gains that you've seen if you leave the company before there is an exit. So yes, you can structure these to be incentives but really sort of tie those employees into the company and really focus their behaviour on to achieving a specific goal, i.e. the exit of the company.”
The article we mentioned earlier is called ‘Tackling the skills gap in the UK life sciences sector’ covers diversity, incentives and immigration and you can find it on the Outlaw website.