Ecovis Global > Why Should You Implement an Employee Share Option Plan?
Why Should You Implement an Employee Share Option Plan?
27. October 2021
A share option programme is a long-term solution for finding and retaining employees. Employee participation programmes are a great way to create targeted incentives, often in a tax-efficient manner, and to encourage employee engagement.
Employers often compete aggressively for the best talent: they pay higher salaries, offer teleworking, discounted meals, and many other often short-lived incentives. Employee participation programmes are designed for the long term and are particularly beneficial for start-ups. For them these programmes can be one of the main ways to attract the best talents while maintaining their loyalty and motivation.
What is a Share Option?
A share option is the right to buy, at some point in the future, a certain number of shares in a company at a fixed price. The employer can make the granting and exercising of share options dependent on certain targets, such as performance indicators or sales targets. This means that an employee will have the right to exercise their share options provided that the set targets are met at the agreed rate for that period.
Employee development with share programmes is also often chosen by FinTech companies. Although options are particularly popular as a means of promotion abroad, more and more Lithuanian companies are also discovering them. ECOVIS ProventusLaw’s partners also have such examples among FinTech customers, who often decide to first reward employees who work longer or hold higher positions.
We can advise you if you wish to set up and implement a share option programme for employees. Loreta Andziulytė, Attorney at Law, Partner, ECOVIS ProventusLaw, Vilnius, Lithuania
What are the Benefits of Share Options for the Employer and the Employee?
Employers who already offer employee share options see increased employee loyalty and a more active contribution to the company’s success. Many international examples show that it is one of the best tools for building a motivated team, explain the Ecovis experts.
Some companies choose to offer share options to key employees, ensuring that the company’s strategy is executed by a team that has a long-standing history with the company, while others offer share options to all employees. The common goal of both sides of the share option agreement is to motivate the employee to take a long-term approach, thus increasing the value of the employer as a company and aligning the interests of the parties.
The share options are of a purely personal nature. They are inextricably linked to the employee of the specific company. The company is keen to keep the employment relationship as long as possible and, therefore, a crucial condition is usually to set out a long term after which the employees may exercise their right to acquire the shares in the company.