RM2 > Resources > Useful Information > Incentivising employees

Carrot on a stick

Using a share scheme can be an important part of your incentive packages for employees, and can in many cases be tailored to meet individual performance objectives.

In particular, share plans can help in the following circumstances:

  • Attract and recruit new hires
  • Retain existing staff over the medium to long term
  • Align employees’ interests with that of existing shareholders
  • Motivate employees to work towards specific goals

The structure of your share plan should be based on your corporate objectives.  Here are some examples of how you could use a share plan to incentivise employees to help your company achieve its goals:

Corporate objective

Possible share plan structure

Drive towards Company sale

“Exit only” options – options become exercisable only if there is a sale, potentially for a specific target value. 

Increase profitability/turnover or any other measurable target

Options exercisable only based on performance targets.  May use corporate, individual or team based targets

Options may be over shares with dividends but not votes, thus retaining control by existing owners

Exit route for existing shareholders

Transfer of business to Employee Ownership Trust

Gradual transfer of business via Share Incentive Plan for all staff (Partnership Shares)

Consider grant of options to senior managers by existing shareholders

Establish Employee Benefit Trust to grant options/acquire shares

Recruit key senior executive to implement significant growth

Consider Employee Shareholder Status (tax free gift of shares with significant capital gains tax relief on sale)

Consider Growth Share Plan to protect existing company value for current shareholders, with rewards for senior executive limited to future growth

 

Make all employees think like owners – including dividend payments

Share Incentive Plan – consider mix of Free, Matching and Partnership Shares to maximise impact

 
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