Share The Wealth

Author:Mr Tom Hicks

There are key reasons for appointing an experienced EBT provider for your share plans

Share plans, commonly the responsibility of a company's secretariat function, are a popular tool for attracting, motivating and retaining employees, whilst at the same time aligning their interests to those of shareholders and improving organisational performance.

The use of share plans, and the facilitation of employee share ownership more generally, is nothing new in the UK and the principle is actively encouraged by the UK government. Alongside the availability of tax approved plans and corporation tax deductions, the opening line of the government's consultation outcome paper on a new employee shareholding vehicle stated "The government is committed to supporting employee ownership and encouraging its use more widely in UK business".

Graeme Nuttall's independent review of employee ownership for the Department for Business, Innovation and Skills in 2012, also concluded that companies with employee ownership see a number of economic benefits, including resilience during an economic downturn, faster job creation and higher levels of commitment amongst employees, which are not insignificant given the current challenges facing the UK.

Tailor Made

Whilst the general concept of adopting a mechanism whereby employees have an interest in shares in their employing company is simple, this is not a case of one-size-fits-all. It is essential for a company to identify their target audience, understand how they prioritise what they wish to achieve from their incentive arrangements, and tailor their share based reward accordingly.

The flipside of the ability to tailor share rewards is that the choices available to companies can be bewildering. It is important however, not to underestimate the advantages that are afforded to companies and their employees as a result of the initial investment in selecting the most appropriate plan(s) and ensuring their effective implementation.

For example, a private company with an eye on an exit event and with a small number of key employees or challenges around senior employee retention will be likely to adopt a plan that primarily rewards those employees for continued employment to at least the point of exit, such as a management incentive plan. In comparison, a large listed global company will need to consider local tax implications and cultures before adopting or reviewing their share plans. In this case, it may be that several...

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