A share option is the right to buy a certain number of shares at a fixed price, some time in the future, within a company. Employees can generally exercise their options - ie buy the shares - after a specified period, known as the vesting period. You can make the granting and exercising of options dependent on reaching certain targets, such as sales targets. When an employee exercises their options, it's at the price fixed at the date of grant, ie when the options were given to the employee, regardless of the prevailing market price.
They can then keep the shares or, if the market price is higher, sell them at a profit. Share-award schemes involve giving employees actual shares rather than options, free or for less than their market value. When deciding to offer shares, you can choose from a variety of different types, which have different rights. See shares and shareholders.
An employee share scheme can help a company's owners to transfer ownership to those working in the business, eg to family or to enable a management buy-out. You can sell your company gradually and obtain tax relief while doing this. The tax relief available depends on the share scheme, eg deferred capital gains tax on the sale of shares through an HMRC-approved share incentive plan. For further information see tax and Employee Share Schemes. Home Employment and skills Pay and pensions.
Share-option schemes Share-option schemes are typically used as an incentive for employees. Share-award schemes Share-award schemes involve giving employees actual shares rather than options, free or for less than their market value. Share-purchase schemes Share-purchase schemes allow employees to: Printer-friendly version Send by email.
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