From our experience we have listed below the most common questions that arise when considering an employee share scheme or employee ownership. If you haven’t found your answer please get in touch.
- Will a share scheme benefit our company?
There is a variety of independent research showing a strong positive connection between employee share ownership and improved company performance. Researchers have looked at different degrees of employee ownership and at particular types of employee share scheme. We have put together a summary of findings of some of the recent research which provides more background.
- Do we need an all-employee share scheme or one for our key people only?
The priority for many companies is to create a share scheme for their key people. Others take the view that expanding share ownership more widely will have a greater positive impact. Your own approach is likely to depend on your business, the profile of your employees and how many shares are available for use in your share scheme.
An all-employee scheme is likely to need more administration, although, if you wish, this can be outsourced.
- How do I work out what sort of share scheme is best for my company?
Please take a look at our Which Share Scheme page.
- Are there any tax incentives for employee share schemes?
Yes, in the UK there are tax incentives for both a company and its employees, although a share scheme will need to meet some precise requirements to secure income tax reliefs. Tax incentives might also be available in jurisdictions outside the UK.
- Is an employee share scheme the same as an employee share plan?
Yes, the only difference is that in the UK we tend to use the phrase employee share scheme whereas in the USA and Canada the preferred term is employee share plan. Other terms with the same or similar meanings are included in our Glossary
- Does my client’s share scheme need shareholder approval?
We will tell you if this is needed or advisable. In some cases your client will need its shareholders to approve the launch of a new share scheme but it won't always be necessary.
- Will my client’s share scheme need to be professionally administered?
For most share schemes involving a small number of employees only, administration may be straightforward and so it could be cost-effective and practical for your client to do this itself. For an employee share scheme involving larger numbers of employees, external help may be useful, in which case we can arrange that as part of our service. The one area where some continuing assistance may be needed is filing an annual return for the share scheme with HM Revenue and Customs, and we will also be happy to assist with that.
- Does my client’s company need an employee trust?
A trust can sometimes be useful as a warehouse for a company's shares where it wishes to operate an internal share market or arrange for the purchase of shares from a departing employee. In a limited number of other cases, including where the chosen share scheme is a SIP or where an employee owned company is being created, an employee trust (or employee ownership trust or EOT) may be an important component in your share scheme. However, we think that in many cases an employee trust will not be needed. Whilst trusts can play a very useful role in the operation of an employee share scheme, anti-avoidance legislation means that care is needed in the use of a trust (or any third party) to provide shares or other forms of benefit to any employees.
- How long will it take to set up?
This is likely to depend on whether it is to be extended to more than one country, whether HM Revenue and Customs are to be involved in the process and, if the company is listed, whether the share scheme will need shareholder approval. If shareholder approval is not needed (or is needed but the company is private with only a small number of shareholders), it is to be operated only in the UK and HM Revenue and Customs are not involved in the process, the share scheme could be up and running in a matter of weeks. Otherwise, it may well take longer. A typical time for a private company is between two and three months.
- How much will it cost?
We won't charge for an initial discussion or meeting at our offices. Once we've then helped to identify a potential solution, we will confirm to you the cost of you engaging us to advise on more detailed design and implementation. We are normally able to quote a fixed cost but should this not be practical we will aim to provide a cost range with a top limit.
We have built our success on our ability to deliver excellent service at costs noticeably lower than those charged by many larger law firms, accountants and consultants. This is just one of the ways in which we believe our service meets the needs of the private and smaller listed company.
- Why choose us to help you?
If you choose us, you will be entrusting the design and setting up of your client’s company's share scheme to acknowledged share scheme specialists. We have the experience to help you create a plan which aligns with your commercial objectives and to ensure compliance with all the relevant company law, employment law and taxation issues that may apply to the share scheme. We pride ourselves on delivering a client-friendly and personal service and our ability to demystify the issues, which we believe our Testimonials demonstrate. But we think you'll want to talk to us to decide for yourself, so do please contact us if you would like to arrange a meeting or to discuss the situation by telephone or email.
- What is an EMI scheme?
An Enterprise Management Incentive (EMI) scheme is a way of rewarding selected employees for performance and loyalty by giving them the right to acquire shares in their company. Employee’s reward is taxed at a significantly lower rate compared with bonuses or other cash rewards.
- How do EMI schemes work?
Under an EMI scheme, an employee is given the right to acquire shares in their company, from a future date at a fixed price. The more those shares subsequently grow in value, the greater the employee’s gain through buying at a price below value at time of purchase.
- What is a share incentive plan?
A Share Incentive Plan (SIP) is an employee share scheme under which employees may acquire shares in their company, with tax reliefs. They enjoy relief against income tax and NI to purchase shares and/or receive free shares without being taxed on their value. All employees must be allowed to participate.
- What is an employee benefit trust?
- How to give shares to an employee?
The main ways for an employee to acquire shares in their company are (1) purchase (2) free shares or (3) options to acquire shares in the future. In the UK, a number of statutory tax incentives help reduce the financial cost to employees of acquiring shares.
- What is an employee-owned company?
An employee-owned company is one that is wholly or substantially owned by all its employees. Ownership can be direct (all employees hold shares), indirect (shares are held by an employee ownership trust) or a mix of the two.
- What is an employee ownership trust?
- Why set up an Employee Benefit Trust?
You might set up an employee benefit trust to buy shares from employee shareholders and recycle them back to other employees, or as part of an ownership succession plan, or to create a long term pool of shares held for the benefit of employees.