Known as an employee share purchase plan, share options or equity scheme, employee share schemes are used to attract, retain and motivate employees. Schemes can vary depending on the company (and the terms of the scheme can differ depending on the company) so it is important to consider carefully what the pros and cons are before becoming involved in an employee share scheme
Employee share schemes are designed so that you can receive or buy shares in the company that you work for. Often those shares are available to you at a discounted rate from what is currently the market price. Employee share schemes are a great way to reward or remunerate employees for their work. They also incentivise employees to stay with your company for longer and share in its success
There are different ways of paying for shares, such as:
- salary sacrifice
- over a set period (say, 6 months)
- dividends
- received on shares
- a loan from your employer
- full payment up front
You may be able to receive shares as a performance bonus or as remuneration instead of a higher salary. In a large company, this may come as “ordinary shares” which give an equity investment, but in a smaller company you may only receive dividends.
Each share scheme is different, so look at the terms and conditions of the offer. Check:
- when you can buy or sell the shares
- if you will receive dividend payments
- what happens to your shares if you leave the company
- the tax benefits
