Share Option Schemes
Retaining and motivating staff are key issues for many employers. Research in the UK and USA has shown a clear link between employee share ownership and increases in productivity. The government has therefore introduced two ways in which an employer can provide mechanisms for employees to obtain shares in the employer company without necessarily suffering a large tax bill.
The two routes are:
- Enterprise Management Incentives (EMI) and
- Share Incentive Plans (SIPs).
EMI allows selected employees (often key to the employer) to be given the opportunity to acquire a significant number of shares in their employer through the issue of options. A SIP is designed to allow all employees to participate in their business and to encourage long-term shareholding by them.
EMI: Points to consider
There are a number of issues to consider in deciding whether EMI is suitable for your company.
- Does the company qualify?
- Which employees are eligible and who should be issued options?
- What type of shares will be issued?
- When will the rights to exercise options arise?
- The costs of setting up the option plans are not tax deductible.