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Employee share incentive schemes is a generic term that is commonly used to refer to a range of share based methods that can be used by an employer to remunerate their employees with reference to the equity of the company/group. Employee share incentives can take a number of forms involving either shares in the company/group (Employee Share Plan), or the granting of share options (Employee Share Option Plan).
Employee Share Option plans differ from Employee Share Plans as they do not involve the immediate acquisition of shares, but give the ability to acquire shares at a future point in time, for a pre-agreed price. In contrast, there is usually an upfront acquisition of shares under an employee share plan. With careful planning and implementation, it may be possible in some cases to provide these benefits in a UK tax efficient manner.
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Employees are key to any business and employee share incentive schemes can be a good way for a company to attract, incentivise, reward and retain employees. Attract new talent Retain existing talent Encourage employees to grow the business Remunerate employees without the cash cost of bonuses/salary increases Potential exit planning
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Share incentive schemes can be as flexible and also as complicated as a company may wish to make them and can include a variety of conditions/criteria so as to meet the needs of a business whilst also being a powerful tool to attract, retain, motivate and reward staff.
Structured correctly, these awards can, in many cases, be achieved in a tax efficient manner.
Our Shares Scheme team will be able to guide you through the design and implementation of your employee share incentive scheme, and the myriad of tax legislation surrounding these potentially tax efficient methods of employee incentivisation.
Where relevant, the Menzies Valuations Team can assist with company valuations associated with employee share incentive schemes and agreeing such valuations with HM Revenue & Customs where this is possible.
Common types of employee incentive schemes
In the UK, employee share incentive schemes fall into two general camps – those with UK tax advantages and those with no UK tax advantages. Links to further information regarding some of these schemes are below.
Employee Share Options:
- Tax advantaged – Enterprise Management Incentive Scheme (EMI)
- Tax advantaged – Company Share Option Plan (CSOP)
- Tax advantaged – Save As You Earn Option Plan (SAYE)
- Non tax advantaged – “unapproved” share option plan menzies.co.uk
Employee Share Plans:
- Share Incentive Plans (SIP) – all employees
- Growth shares
- Nil paid and Partly paid shares
- Other Phantom Share Schemes