Employee Share Schemes

Employee share plans offer employees a stake in their company, all tailored to meet specific business objectives. Share plans can be a valuable way to reward employees and secure your businesses future through succession planning.

What is an Employee Share Scheme (ESS)?

Employee share schemes (also known as employee share plans) offer a highly effective way for employees to acquire shares in their company. Share plans are used for a variety of reasons, including to reward employees and as part of succession planning.

Awarding staff shares in a company can develop a real sense of ownership and may ultimately increase loyalty and engagement. Share ownership can help align employees’ interests with those of other shareholders, driving growth and increasing share value.

Which employee share scheme is right for me?

There are many types of share plans available, and we can help you choose the scheme that is the best fit for your business.

Enterprise Management Incentive (EMI)

A popular, tax-advantaged discretionary share option scheme aimed at smaller independent companies with fewer than 250 employees (fewer than 500 from April 2026). This flexible plan is typically used to help retain and incentivise the key people integral to the future success of the company. It can also be extended to all employees.

  • Tax advantaged (HMRC recognised)
  • Can choose the participants
  • Financial limits apply
  • Shares must be in an independent company (ie top company in a group)
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Company Share Option Plan (CSOP)

A popular, tax-advantaged discretionary share option plan frequently used by companies that don’t qualify for EMI, usually because they have exceeded the employee limit, or carry out certain excluded trades. Like EMI, CSOP can be used both for key staff or extended to all employees in the company.

  • Tax advantaged (HMRC recognised)
  • Can choose the participants
  • Financial limits apply
  • Shares must be in an independent company (ie top company in a group)?
Download factsheet

Share Incentive Plan (SIP)

A tax-efficient share plan that must be offered to all employees. Shares can be gifted and/or bought out of pre-tax-salary. Ideal for long-term retention, shares are entirely tax free after five years. Popular with listed and private companies aiming for wider employee ownership.

  • Tax advantaged (HMRC recognised)
  • Must be offered to all employees
  • Financial limits apply
  • Shares must be in an independent company (ie top company in a group)
Download factsheet

Save As You Earn / Sharesave (SAYE)

A tax-advantaged option plan that must offered to all employees. Employees are granted options over shares and enter into a 3 or 5 year savings contract, saving up to £500 per month. After the savings period, they can choose to use their savings to buy the shares, or simply keep their savings. Popular with larger, listed companies.

  • Tax advantaged (HMRC recognised)
  • Must be offered to all employees
  • Financial limits apply
  • Shares must be in an independent company (ie top company in a group)
Download factsheet

Growth Share Plan (GSP)

A GSP rewards key employees in private companies based solely on future growth in company value. It's ideal when founders want to protect existing share value, with employees benefiting only from growth beyond a set threshold, usually upon an exit event. This plan offers potential capital gains tax benefits and can be used in subsidiaries.

  • Tax advantaged (but not recognised by HMRC)
  • Can choose the participants
  • No financial limits
  • May use subsidiary company shares
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Deferred Share Purchase Plan (DSPP)

DSPPs allow employees to purchase shares immediately, but defer payment, hence helping with affordability. Employees receive shares immediately , thus benefiting from the potential of dividend payments and capital gains tax treatment. DSPPs carry a financial risk as payment is required regardless of future value.

  • Tax advantaged (but not recognised by HMRC)
  • Can choose the participants
  • No financial limits
  • May use subsidiary shares
Download factsheet

Non Tax Advantaged Share
Option Plan (NTA)

Simple, cost-effective plan offers share options to employees with complete flexibility. However, it lacks tax advantages, making it suitable only when tax-advantaged options are exhausted or unavailable. It can be used in subsidiaries.

  • No tax advantages
  • Can choose the participants
  • No financial limits
  • May use subsidiary shares
Download factsheet

Long Term Incentive Plan (LTIP)

LTIPs reward senior executives in listed companies based on long-term growth. They often involve options or performance shares tied to challenging performance goals aligned with business growth.

  • Tax treatment depends on structure
  • Can choose the participants
  • No financial limits
  • May use subsidiary shares
Download factsheet

Employee Benefit Trust & Trustee Services (EBT)

EBTs aren't share plans themselves, but they hold shares for use in employee ownership schemes. Useful for private companies, EBTs "warehouse" shares, creating an internal market and providing liquidity where shares are difficult to sell. EBTs can be used for purposes such as independent and family financial arrangements. RM2 only advises on EBTs that are used in the context of an employee share plan.

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How to set up an employee share scheme

Choosing and implementing an employee share scheme takes a lot of planning. We are here to guide you through the process, so you can get the right scheme in place for your business and employees.

  • Identify your objectives. The design will flow from your objectives, so the more precise you are the better. Do you want to focus people on an exit? Do you want to reward all employees as a team? Do you have just one key recruit in mind? We will ask you lots of questions to tease out your objectives.
  • Choose a share scheme. We can guide quickly to the front-runner. At this stage you may wish to contact our team for a free, no obligation consultation on 020 8949 5522 or make use of our extensive suite of resources to help you decide on the scheme most suited to your business.
  • Design and model your share scheme. At this stage you will need to decide on any rights and conditions to attach to shares, such as performance conditions and leaver provisions. Don’t worry: we’ll recommend features for you. A key decision is the amount of equity you want to set aside for share schemes. We’ll help you with an indicative valuation and some equity modelling.
  • Implement your employee share scheme. Once the design and modelling are complete, we then agree a share valuation with the HMRC, update your Articles of Association, prepare Board minutes and prepare your scheme documentation.
  • Communicate your share scheme. Communicating information about your share scheme to all the participants is vital its success. As standard, we will provide all clients with easy-to-follow notes explaining your scheme. We can provide further help and guidance on how to effectively promote your scheme if you wish.
  • Compliance and Administration. Once your scheme is implemented it will need to be administered to ensure it remains compliant. We have the most experienced Operations team for share schemes in the UK, so you can be confident that your scheme compliance and administration is in capable hands.
  • Ongoing support. We try to be as proactive as possible when it comes to monitoring your scheme’s performance. We can help improve any equity-based arrangements. You and we are always learning.

What are the benefits of employee share schemes?

Share schemes are a practical way for companies of all sizes - at whatever point in the business life-cycle - to achieve many highly-valuable benefits.

Attract top talent.

Offering an equity stake to key recruits shows that you respect their value and consider them to be a valuable part of the business. This also shows potential employees that they will directly benefit from the hard work they put in to help the company grow.

Boost employee engagement.

Employee engagement drives organizational success. Engaged employees are more productive and committed. Share ownership boosts engagement, giving employees a sense of ownership in company success.

Retain high performers.

Employee churn is costly. Share ownership can increase employee connection, reward, and retention, saving money and boosting morale. So your star performers can shine on their own share of the stage.

Increase productivity.

Boost productivity with motivated employees. Share ownership incentivises employees effectively, offering rewards and a direct stake in company success.

Plan your succession.

Employee ownership offers a smooth retirement transition, ensuring your legacy and company values endure. Transferring control to your team protects the future of your business while providing peace of mind.

Reward your team.

Rewarding your team with equity not only preserves scarce cash but also ties people to longer term outcomes, such as a sale of the company. It can also be a lot more tax-efficient for the company and the employees.

David Aldrich
Chief Human Resources Officer dotdigital

Thanks for your friendly and professional support in setting up and running our SIP and CSOP. The plans are a great benefit for our staff, and RM2’s online portal makes everything easily accessible for them. We’d happily recommend your team to any company looking to set up and run an employee share plan!

Related

Find out more about how Employee Share Schemes are setting businesses - and their people - up for success.

Case study
Factsheets
Introduction to ESS
ESS in an EOT company

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