Implementing share plans

Planning and implementation of share plans

There may be a number of reasons why an incentive arrangement is being considered. It is necessary to identify clearly from the outset the key purpose of such a plan, as it will then guide what type of plan is adopted (if any).

Reasons for considering an incentive arrangement include:

1. •

   to align employees with the businesses/shareholders’ interests

2. •

   to give employees an opportunity to accumulate wealth in a similar manner to shareholders

3. •

   to encourage loyalty and retain staff

4. •

   to reward employees

5. •

   to remunerate employees in a cost-effective and tax-efficient manner

6. •

   to relieve the pressure on cash for the company

7. •

   to allow an owner to realise their investment/succession planning, and/or

8. •

   to recruit and retain senior employees

Once it has been decided to operate a share plan, the planning process is essential. For an overview of the questions which need to be asked when planning a new incentive arrangement, see Practice Note: Planning new employee incentive arrangements. The outcome of these discussions will guide the type of plan(s) ultimately adopted and the terms of the plan(s). The main questions are: