Set up employee share schemes

The first step in choosing a suitable share scheme is to decide on your business objectives for introducing such a scheme.

Why introduce a share scheme?

You might want to introduce an employee share scheme to:

• attract new talent to work for your business
• offer an incentive to retain valuable staff across the business
• provide targeted incentives to selected employees
• conserve cash and reduce the cost of pay and/or bonuses

Employees can be given shares that are held in a trust, receive share options, or purchase shares on attractive terms.

Other considerations when introducing a share scheme

When thinking about introducing a share scheme for your business, you will also need to consider:

Costs

Work out how much to spend on the share scheme plan.

Staff eligibility

Determine the details of the share scheme plan, eg, employee eligibility.

Scheme changes or closes

Decide what will happen if the share scheme needs to be wound up, or if the tax incentives change.

Regulatory requirements

Determine how the regulatory requirements attached to the share scheme affect it.

Value your shares

Work out the value of your shares and how you go about this.

Tax reporting

There are HM Revenue & Customs (HMRC) reporting requirements if you plan to operate an approved share scheme.

Choosing a suitable scheme

Whether you prefer a HMRC-approved share scheme, with the associated tax and National Insurance contribution benefits, or an unapproved taxed employee share scheme, which allows you flexibility of design

Share schemes: seek professional advice

It is worthwhile seeking expert financial advice from an accountant and/or solicitor before making a final decision on introducing an employee share scheme for your business.