Employee share options are a type of compensation that some companies offer to their employees. Employee share options allow employees to purchase company shares for an agreed-upon price, usually at the current market value. The idea behind this type of compensation is that if the company succeeds, then so will its employees and vice versa. In this article, we will explore three different aspects or advantages of Employee Share Options:
Incentives
Employee share options provide employees with an incentive to work hard. If the company succeeds, then so will its employees and vice versa; therefore, it makes sense for them to put in extra effort at work.
Retention of staff members
These share options can serve as a retention tool by acting as a form of compensation that is not offered elsewhere within the industry or market, which helps companies retain key talent. This also acts as an incentive for prospective employees who may be considering joining your team if they are aware that you offer this type of benefit.
Reduces taxable income
Employee shares are taxed differently depending on how long they have been held onto before being sold off again. If Employee Share options are held onto for over a year before being sold, then the company can write off 20% of the Employee’s taxable income against their Employee Share Option Tax liability.
To conclude, Employee Share Options are a great incentive for employees and prospective employees alike. Employees enjoy the fact that they can earn money off of their shares without having to pay capital gains tax on them, while companies get an opportunity to incentivize their key staff members and reduce taxable income at the same time.
