Share Incentive Plan (SIP)

Our experienced specialist team can help you set up and manage a Share Incentive Plan tailored to your business needs. Get in touch for a free consultation today.

A share incentive plan (SIP) is a type of employee share scheme that allows an employer to award shares to all their employees with the motivation of incentivising them.

The plan is designed to align the interests of the employees with those of the company and its existing shareholders, by linking the value of the shares with the performance of the business. Each participant in a Share Incentive Plan can receive shares worth up to £9,000 per tax year. 

Companies can make various different types of awards under a SIP. Under a Share Incentive Plan, shares can be awarded to employees through one (or a combination) of the following methods: Free Shares, Partnership Shares, Matching Shares and Dividend Shares.

Free Shares allow employers to give up to £3,600 worth of shares (free from tax and National Insurance Contributions (NICs) to each employee each tax year (although employees may be subject to income tax and NICs in the future). Partnership Shares allow employees to purchase shares out of pre-tax salary normally worth up to £1,800 per tax year. Partnership Shares can also be combined with Matching Shares, where for each  share bought, employees can receive up to two free additional shares. If a company pays dividends on the shares held in the SIP these can be reinvested as Dividend Shares rather than paid in cash.

With all types of award in a SIP, employee shares are held and protected under a Share Incentive Plan Trust, where after a five-year period the shares can be withdrawn and sold with no Income Tax or NICs owed by the employee or the business. SIP shares are also free from Capital Gains Tax (CGT) for so long as they are held in the SIP Trust.

A SIP is an all employee plan, which means that the company must make the plan available to all employees in the business (although, in companies with subsidiaries, it is possible to offer the plan only to specific subsidiary companies if that is preferred).

There are several business productivity and tax-related advantages to Share Incentive Plans. Some of the benefits include (but are not limited to):

  • Flexible scheme. The range of SIP award types available allows you to tailor your scheme to the needs of your business and employees.
  • Rewards participants on a tax-advantaged basis. SIPs are a tax-efficient way of incentivising employees. Under a SIP, each employee can receive up to £3,600 worth of free shares each year tax-free. This means that they receive the full value of the shares without having to pay income tax or National Insurance Contributions (NICs) on them. Partnership shares can be bought out of pre-tax/NICs earnings. The company can also choose to give employees up to two more free shares for each share that an employee buys (again, shares are bought out of pre-tax salary). In addition, if employees hold onto the shares they acquire through the plan for at least 5 years, no income tax and NICs are payable and the shares are also exempt from Capital Gains Tax for as long as they are held in the SIP Trust.
  • Increases employee retention rates. Employees are more likely to feel valued, invested, and loyal to their employer if they have a financial stake in the company’s success. This can go a long way in reducing staff turnover and attracting highly skilled workers.
  • Increases employee productivity and performance. By offering employees shares in the business, they take on a greater interest in the company’s success and are motivated to work harder to achieve this. This can lead to a more engaged workforce and increased innovation and productivity, which in turn benefits the overall success of the business.
  • Attracts top talent. As competition for skilled workers continues to intensify, companies that offer an attractive SIP are likely to have a distinct advantage in attracting the best and brightest candidates in their field.
  • Minimised risk. Because of the tax advantages, a SIP offers a relatively safe investment choice for shareholders, even in a private company.
  • All-employee plan. Subject to certain qualifying service requirements, all UK resident employees in the relevant employing companies must be invited to participate in a SIP. This broad-based employee ownership model can help to engender a culture of shared ownership and engagement in the business.


Although there are no legal restrictions in place preventing companies from setting up their own Share Incentive Plan, we would strongly advise against it due to the various legal, tax and accounting implications and ongoing compliance of a SIP. There are also important compliance and administrative activities that need to be completed correctly to make your SIP legally compliant. You will also need to find a suitably knowledgeable firm or individuals to act as Trustees of the Share Incentive Plan.

Working with employee share scheme experts helps you ensure that your selected plan is not only a good fit for your business and employees, but that it is economically feasible and does not pose unnecessary financial risks. Having specialist legal knowledge on your side is also valuable when it comes to drafting plan documents, employee communication materials and SIP award contracts.

How we can help with Share Incentive Plans

RM2 are leading employee share scheme advisers specialising in all types of employee share schemes (including SIP) and employee ownership plans. We are market leaders in offering our bespoke Employee Share Scheme services.

We take a unique consultative approach to building share plans by finding out what our clients are specifically looking to achieve. This allows us to deliver a professional and effective service tailored to the needs of your business and its employees.

Client Testimonial

“Clearly, there is a lot of experience at RM2 that is made available to their clients. It was great to be able to meet with their staff at the beginning of the process and explore the ways we could work together. The complication with our project was also that we had to comply with the rules of the Global bioMerieux Share Plan. RM2 have directly worked with Corporate and the Partner bank in France with little involvement from myself. The solution implemented is perfect for bioMerieux and the Launch was a real success. As a conclusion, only positive things to say and I would really recommend RM2 to other businesses with similar SIP projects.”

Ivan Chermarin
Finance and Administration Manager
bioMerieux UK Ltd

Want to know more? Download free information on each share plan & the employee ownership trust

Understanding our Share Incentive Plan process

Our highly experienced team are well positioned to guide your company through every stage of the SIP implementation process, including:

Our Share Incentive Plan design work builds upon our understanding of your business objectives, so the more precise you can be during this stage the better. Our team will ask you lots of questions to help build an effective SIP as closely aligned to your long-term goals as possible, with some typical queries including:

  • What is your business plan?
  • What do you need from your employees to execute your business plan successfully?

Once we understand what you want to achieve from your Share Incentive Plan, then our team will begin to build your scheme. At this stage, you will need to decide on the type of shares that you want to offer initially and in the future, any rights and conditions you want attached to your company shares, such as voting rights and leaver provisions. If you are unsure of which conditions to implement, then don’t worry – our team will help guide and advise you on your options and offer suggestions based on the structure of your business and overall objectives.

Another key decision you will have to make during this stage is the amount of equity you want to set aside for your share scheme. Our team will be able to help you with this by making an indicative valuation of your company and running some equity modelling.

Following the SIP’s design and modelling stage, we will work through your company structure and identify the changes that will need to be approved by shareholders. We will then prepare resolutions to be passed and work with you to obtain approval from your existing company shareholders.

Your Articles of Association are the key document that outlines the rights and restrictions of shares under a company share scheme as well as those held by existing shareholders. They are vital for ensuring that your Share Incentive Plan is commercially effective and legally compliant.

Our team will help prepare amendments to your Articles so that these rights and restrictions strike the balance between delivering value to employees whilst protecting the interests of other shareholders.

Our team will prepare valuations for your company shares and ensure that they are approved by HMRC. Your share valuation will have a significant impact on the tax treatment of the SIP shares and the value delivered to employees, so depending on the results of your valuation, our team will advise you of the meaning and implications and how you should adapt your strategy according to the results.

RM2 can provide communications support to your employees so that they understand what a Share Incentive Plan is, how your company SIP works and how they can benefit from it. We will provide easy-to-follow notes explaining your SIP in simple terms to employees and if required, provide educational webinars or on-site workshops that allows your employees to ask questions and encourage participation in your SIP.

Once your SIP is implemented it is vital that it is continually administered to ensure that it remains legally compliant and in line with the government’s strict regulations on employee share schemes. RM2 have the most experienced compliance and administration team for share schemes in the UK and are experienced in acting as Trustees of SIP Trusts, so you can be confident that your scheme will be efficiently managed and in capable knowledgable  hands.

Our team will be as proactive as possible when monitoring your scheme’s performance; offering recommendations for improving your equity-based arrangements and developing your SIP as your company grows or goes under significant changes such as change in management or leadership.

Why choose RM2 as your Share Incentive Plan advisers?

We have the most experienced team of advisers dedicated to private and smaller listed company employee share schemes in the UK.

We understand that a ‘one-size-fits-all’ approach to a SIP will rarely meet a client’s objectives, so we will work in partnership with your business to create a bespoke plan tailored to your goals.

Our team consists of a wide range of skilled professionals (including solicitors, accountants and share plan administrators) to help guide you through the SIP set-up process and ensure that your final plan is being managed effectively.

At RM2, we believe in taking a consultative approach to building share plans by finding out precisely what our clients are looking to achieve. This helps us to deliver a professional and effective service that helps clients meet their specific goals and plan for the future.

We are well positioned to guide your company through every stage of the share scheme implementation process, from strategically planning the design of your SIP to administering it according to the UK government’s guidelines and providing ongoing compliance and administrative support.

Meet the team

John Dormer

Share Incentives Director

Rachel Doex

Project Manager

Sarah Anderson

Business Development Manager

Get in touch for a FREE SIP consultation


If you are interested in creating a Share Incentive Plan for your company or would like to chat about other employee share schemes that may be available to you, get in touch today to enquire about our free consultations for businesses.

Our consultations can take place over the phone or via video call and allow you to ask an experienced member of our team questions about SIPs, our services, and the set-up costs (as our charges will vary depending on factors like the size and complexity of your business and likely plan features).

Ask about our free consultations for businesses by calling us on 020 8949 5522 or by filling out the form below to request a call back from our team.

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