5 Reasons To Set Up An Employee Share Scheme

An employee share scheme is a program in which a company provides its employees with an ownership stake in the company through the issuance of stock or stock options. Whilst this may not be a suitable structure for all businesses, there are several benefits for both the business and the employees. Here are 5 reasons to set up an employee share scheme.

Retention of key employees

Often top performers within the company may come to a natural end of their job where they seek a new challenge. An employee share scheme can help retain these key employees by providing them with a financial incentive to stay with the company, at a time they would usually go elsewhere. This is because employees who own shares or stock options have a vested interest in the success of the company and are more likely to remain loyal to it.

Motivation and engagement

An employee share scheme can also motivate and engage employees by giving them a sense of ownership and pride in the company’s success. This can lead to increased productivity, innovation, and commitment to the company’s goals. Having an employee share scheme can truly alter your employees’ attitudes and they will probably be a lot more willing to put in additional work if this increases the benefits of having shares.

Recruit higher quality staff

An employee share scheme can also be used as a recruitment tool to attract top talent to the company. This is because the prospect of owning a stake in the company can be an attractive perk for potential hires. If you currently struggle to attain high-quality, highly skilled members of staff for your business, this is a potential perk that could persuade them to choose your business over a competitor. When employees learn that they play such an integral role in the company and will directly be rewarded for their hard work and performance, it can make all the difference and is a great way for smaller companies to have a competitive edge over larger incorporations that tend to get the best talent.

Tax benefits

In some places, employee share schemes can offer tax benefits to both the company and the employees. This can make it a more cost-effective way to provide additional compensation to employees in the long run.

Alignment of interests

An employee share scheme can align the interests of employees with those of the company’s shareholders. This is because employees who own shares or stock options have a vested interest in the company’s success and are more likely to make decisions that are in the best interests of the company

Overall, setting up an employee share scheme can be a powerful tool for companies looking to retain key employees, motivate and engage their workforce, attract top talent, and align the interests of employees with those of the company’s shareholders. Not only can it make financial sense, it can significantly help improve the culture of the company and make it a great place to work.