Share schemes for employees are on the rise. Millions of employees are set to gain from them in one way or another, but getting it right is not easy.
One company’s scheme may be an excellent choice for some employees while being terrible for others.
They all depend on your situation. You need to understand what you want to achieve with an employee share scheme before putting your money into it and hoping it will work out.
You can choose between several different types of schemes: ESOPS, SAFEs, options, and so on. So, naturally, this makes your choice more complex than just selecting something generic. While there is no best share scheme for everyone, they each have their pros and cons.
Tips to Choose the Best Employee Share Scheme
According to the Australian Taxation Office rules, start-up companies are eligible for ESS discounts provided their aggregated annual turnover does not exceed $50 million.
Employee share schemes can improve internal equality between employees or attract and retain new talent. If you have a proper understanding of your objectives, finding the correct share scheme is simple.
These basic steps will help you work out what you want from an employee share scheme.
What are Your Objectives?
Before looking at specific types of employee share schemes, consider why they are essential to you. What do they offer that benefits your business? What can’t they do without causing problems elsewhere?
Also, think about who would benefit most from a share scheme. It will make a big difference when deciding which type is best suited to them.
Who is Going to Use These Schemes?
You can’t pick an excellent share scheme until you know who is going to benefit from it. Do you want to grant access to all employees or just senior staff?
Are only recruits suitable, or are existing employees eligible too? How do the employees fit in with your overall compensation package?
What are Your Responsibilities as a Beneficiary?
Once the beneficiaries of a share scheme are identified, think about what you are responsible for.
You must decide whether any of them should be mandatory for all staff members, and if so which ones. It will save headaches later on when some people start claiming non-dues benefits.
How Much Will You Pay Out?
Thinking about that last question early on will help you work out how much money your organization can invest into an employee share scheme before it becomes infeasible.
You need to know what the schemes cost before you get started; otherwise, you could end up with a bill that changes your business plans.
Once you have decided which type of scheme will best suit your needs and choose who it is for, then you can look into how much it will cost and where you can get one from.
Your HR department should help with any of these questions and provide any specific information needed to make an informed decision.
What is Your Budget?
There are many types of share schemes, so don’t forget about costs. ESOPS and SAFEs can both be free or very expensive, depending on what they offer.
They also vary in terms of administrative effort required, so don’t forget to consider that too. Knowing your financial constraints before you start looking for schemes will save you money in the long run.
What are the Payment Options?
It is another fairly straightforward question, but it’s worth considering. Are there any ways to lower costs or make things more manageable on your company budget? Think about reusing them at a later date if possible or making payments regular.
It may also be worth considering future savings when deciding what type of shares are best for you.
Once you know the correct answers to these questions, choosing a suitable share scheme is easy. You need to pick which of these specific schemes will help achieve your objectives while being both affordable and beneficial for members of staff who meet the suitability requirements.