Want the latest insights & updates on employee ownership and share schemes? Employee share ownership using an employee share scheme (also known as an employee share plan or staff share scheme) is a powerful way to encourage your employees to think like owners by acquiring shares in the company, helping to make your business more productive, profitable and resilient.
As specialist employee share ownership lawyers we can provide you with clear, jargon-free, professional advice to help you work out what kind of share scheme will work best in your business.
Download our essential quick guide to share schemes
Different types of employee share schemes available:
CSOP – Company Share Option Plan
EMI – Enterprise Management Incentive
What is employee share ownership?
Employee share ownership means employees acquire shares in the company they work for and this can be achieved in a number of ways. An employee share scheme may be created for selected staff or managers, or may involve all the employees of a company.
View an introduction to share schemes video
Whether you are a start-up, established private company, listed company or international corporation we can provide the help you need.
If you are wondering about the difference between a share scheme and employee ownership –
- a share scheme involves employees holding shares personally, normally alongside other shareholders and over a small total percentage (typically 10-15% maximum)
- employee ownership goes a big step further and involves all of a company’s employees holding a significant stake, often a majority.
Why introduce a Share Scheme?
The main reason companies use such schemes is to recruit, retain and motivate employees.
A number of schemes bring statutory tax reliefs, founded on government belief that they are good for the business and the wider economy, making them a highly cost-effective way of providing long term reward.
There are various ways to introduce employee share ownership in your business depending on your circumstances and objectives.
Share schemes also have the potential to reduce employment costs, by providing long term rewards through shares partly in place of regular salary.
Which Share Scheme Might Suit You Best?
Your choice of scheme (often also called an employee share ownership plan) will depend on the degree of employee share ownership you wish to introduce. You may just want key employees to be able to own shares or you may want all employees to become part-owners of the business by introducing an all-employee share scheme or an employee ownership trust. You might also wish to offer share options to non-employees such as consultants and advisors.
Schemes for all your employees
Schemes for key employees & non-employees
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share schemes for all your employees
A Share Incentive Plan (SIP) is an all-employee share plan which provides statutory tax relief for employees directly acquiring shares in their company.
- Employees can purchase shares with full tax relief and /or be given shares free of tax
- Some companies are excluded
A more detailed guide can be found here
A Save As You Earn Option Plan (or SAYE option plan) is an all-employee share plan which provides statutory tax relief for employees on their financial gains.
- Employees are granted options over shares and agree to save a monthly amount from their salary over three or more years. At the end of the savings period they can either keep the money or use it to exercise the options.
- Straight forward to explain, no risk and tax efficient
A more detailed guide can be found here
About employee share ownership through an employee trust
- Indirect share ownership through an employee trust, often called an employee benefit trust (EBT) or employee ownership trust (EOT)
A more detailed guide can be found here
share schemes for key employees and non-employees
- An option – the right to buy shares in the future at a fixed price in a tax efficient way (gains are subject to CGT rather than income tax)
- Limited to smaller companies (assets <£30m and <250 employees carrying out “qualifying” activities” and limited to £250,000 shares per person
A more detailed guide can be found here
- An option – the right to buy shares in the future at a fixed price in a tax efficient way (gains are subject to CGT rather than income tax)
- Options may not be granted at a discount and are limited to £30,000 shares per person
A more detailed guide can be found here
- Share of a separate class that only acquire capital value once the company’s overall value exceeds a particular threshold
- Valuation questions will arise on receipt of growth shares
A more detailed guide can be found here
An overview of share options without tax advantages, typically called unapproved share options (or non-approved options) and sometimes long term incentive plans (LTIP’s).
Like all other forms of share option, an unapproved share option is a right to acquire shares from a future date at a fixed price. The fixed price is commonly the value of the shares at the date the option is granted, the object being to provide a reward for the option holder based on future growth in share value.
“Unapproved” simply means that it hasn’t received the approval of HM Revenue and Customs for option holders to benefit from any tax breaks.
A more detailed guide can be found here
There are further ways for your company’s key employees to acquire shares in addition to share options and growth shares, including:
You may also be considering incentives for non-employees. Watch our animated guide for more information
To explore how employee ownership or an employee share scheme could work for your company, call me on 020 3818 9420