Employee Share Schemes are designed to align the interests of employees with the overall success and growth of the business. They may also be called share options or an equity scheme.

With an ESS, employees can accrue a stake in the business in the form of private shares, the value of which is tied to the company’s financial performance. Shares can be purchased through salary sacrifice, bought outright with cash, or earned from meeting stipulated KPIs. 

The employee-ownership model creates a financial reward mechanism for business performance and encourages staff to take on an ‘ownership mindset’ in daily work.

Low cost, high reward: 
An ESS offers tangible financial incentives with minimal outlay. Our experience and proven systems take the admin headache out of setting up all the legal and financial matters.

Incentivise innovation:
The ESS model encourages an “Ownership Mindset” culture. With employees literally invested in the business, they begin to think and act like business owners.

Sustainable growth: 
Create a win-win-win situation. Employees benefit by owning a direct stake in the business, while the employer benefits from improved employee performance and employee retention by rewarding key people.

Employee engagement: 
Your ESS is a transparent and easy-to-implement mechanism that provides clear rules and guidelines to help with employee incentives and business succession.

Put simply: with an ESS, employees are issued shares directly. For larger companies, these are typically 'ordinary shares' — an equity investment in the company. Smaller firms usually offer ‘dividend-only shares’ that don’t hold other shareholder rights, such as a vote at the annual general meeting.

With an ESOP, employees may receive either 'share options' (rights to purchase shares at a predetermined price), 'restricted shares' (shares with certain conditions attached), or 'performance rights' (rights to shares subject to meeting performance criteria).

Despite references to ‘shares’ or ‘stock’, neither an ESOP nor ESS requires a company to undergo an IPO (Initial Public Offering) or listing on a stock exchange. They are both available to listed and privately owned companies. 

There are different tax and concession benefits for each type of scheme that are worth talking to your Succession Plus Partner about.

Any rules and qualifying conditions relate only to the Employee Share Scheme. They do not have any effect on the laws governing employment including any enterprise bargaining agreement, award or another arrangement.

An ESS does not include any right to becoming a director or board member. Should an employee become a major shareholder, such appointments (with related liabilities) are a matter of agreement between relevant parties.

Employees who are members of an Employee Share Plan are protected from the liabilities of the employer company. In the case of receivership, restructuring or administration, they would not be liable for any debts or monies owed. Nor are shareowners required to contribute to any losses incurred by the company.