Make your business more productive with an Employee Share Scheme

Employee Share Schemes

Employee share ownership using an employee share scheme is a powerful way of encouraging your employees to think like owners, helping to make your business more productive, profitable and resilient.

As specialist employee share ownership lawyers we can help you work out what kind of employee share scheme will work best in your business

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 an employee share scheme and employee ownership –

  • an employee share scheme involves employees holding shares personally, normally alongside other shareholders
  • employee ownership goes a big step further and involves all of a company’s employees holding a significant stake, often a majority.

Why introduce an Employee Share Scheme?

The main reason companies use employee share schemes is to recruit, retain and motivate employees.

A number of employee share 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.

Employee share schemes also have the potential to reduce employment costs, by providing long term rewards through shares partly in place of regular salary.

Share schemes for all your employees
Share schemes for key employees & non-employees

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What to think about when setting up an employee share scheme

  • Animated introduction to how employee share schemes work

  • Employee share schemes explained by Robert Postlethwaite

  • EMI Video Case Study: John Borghossian, Compass Pathways

These videos do what Postlethwaites' do best. They bring employee ownership to life in a straightforward, easily accessible way

Hugh Yarrow, Investment Director & Fund Manager, Wise Investment

Which Employee Share Scheme Might Suit You Best?

Your choice of share 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.

share schemes for all your employees

Share Incentive Plan (SIP)

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

Save As You Earn (SAYE) Options

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

Trust ownership

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 ALL EMPLOYEES

  • share schemes for all your employees

share schemes for key employees and non-employees

Enterprise Management Incentive (EMI) options
  • 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

Company Share Option Plan (CSOP) options
  • 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

Growth shares
  • 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

Unapproved share options and long term incentive plans (LTIP's)

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

Other arrangements

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

Share schemes for your key employees & non-employees

  • Share schemes for your key employees

  • Incentives for Your Non Employees

  • EMI Video Case Study: Five Points Brewing Company

To explore how employee ownership or an employee share scheme could work for your company,  call me on 020 3818 9420

DAVID REUBEN, DIRECTOR