Why should your business have an employee share option scheme?

Aug 11, 2023 | Business

The UK has a problem with attracting and retaining talent for a number of reasons: ill health, extra retirees, stricter immigration laws are some of the causes reported by the Government.

The result? A lot of businesses (some more than others) are eager for workers — workers who have greater freedom in choosing their employer. As such, you need to be the best employer possible, offering an eye-catching benefits package that persuades people to work for and stay with your business.

This is where employee share option schemes come into play.


What is the employee option share scheme?

An employee share scheme is a way of sharing company ownership with your team, be it a few members or everyone on it.

To share that equity, you can offer them share or share options, the choice often depending on your company and the contribution individual team members make:

  • Shares give the holder a percentage of ownership of a company. When a company issues someone ordinary shares, the recipient immediately owns those shares.
  • Share options give the holder the right to buy shares in your company at a fixed point in the future. They do not own the shares when the right to buy is given.

According to the Government website, the company share option plan allows employees to buy up to £60,000 worth of shares in the future at a fixed price.

They will not have to pay income tax or National Insurance contributions on the difference between what they pay and what they’re actually worth. However, they may need to pay capital gains tax if they sell the shares.


Why you should launch a share scheme

Share schemes, including option share schemes, offer multiple benefits for your company:

  1. Attract the best talent

Hiring is tough, but offering equity to new employees is one way of bringing top talent into your business, especially if they’re looking for a stable career with a reliable employer.

  1. Retain the best talent

Sharing ownership with your team can also persuade people to stay with you, as they are less likely to leave something that they own a piece of.

  1. Increase productivity and performance

Employees who are also shareholders tend to work harder because they feel directly responsible for the value of the company. After all, if they want to see high dividend payments, they’ll only get them if the company is performing well.

This will often motivate them to do their best work and take more responsibility for the performance of their co-workers.

More productive employees mean not only a better work culture and less turnover but also higher output, increased revenue for the business, and lower recruitment costs.

  1. Improve employee engagement

If you pride yourself on promoting employee engagement and well-being, a share option scheme could suit your company. After all, they will allow your team to feel included in the mission, direction and success of the business.

The more they feel included, the more productive they are, the more they want to stay with the company, and the happier they are in general.


Is an employee share option scheme right for your company?

Setting up an employee share option scheme can be a great way for you to reward your staff for their years of service, boost morale and give them a vested interest in the company.

If you think a scheme would be right for your business, we would be happy to help you with the planning process. Not sure whether it’s the right move? Get in touch with us today.

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