Employee Share Schemes 2023: Driving performance and retaining talent

Employee share schemes have been used for many years as a tool to attract, reward and retain talent by offering employees a stake in the companies they work for. With the exception of start up companies, these are generally positioned as long term incentives (“LTI”) schemes. The design of these has changed over recent years in response to a changing landscape in the taxation for employee share schemes. There are also more obligations on companies to properly assess the value of shares, where these are being provided to employees under such schemes.

In this piece we explore:

– Why companies establish share schemes;

– The recent changes to the tax environment;

– IRD expectations on companies with respect to the valuation of shares provided to employees in share schemes (CS-17/01);

– A snapshot of listed company share schemes, and recent trends. This includes a broader perspective to include long and short term incentives, including consideration of the types of metrics used to measure performance;

– Considerations for the design of your scheme; and

– For listed companies, the implications of the recent Climate Standard (CS-1) which is placing a disclosure requirement of ‘whether and if so, how’ climate related performance metrics are incorporated into employee remuneration policies