Incentive plans for listed companies
Incentive plans for listed companies
Listed companies and groups will operate a range of incentive schemes in addition to the salary and benefits that they pay to their staff. Traditionally, these take the form of a shorter-term cash bonus scheme and a long-term incentive that delivers shares in the listed parent company. In practice, the nature of a listed company’s incentive schemes can vary significantly depending on the company’s circumstances and aims.
How do listed companies use incentive plans?
For more senior employees, listed companies can choose to have a discretionary share scheme. If smaller listed companies meet the conditions, this could be structured as an Enterprise Management Incentive share option plan, otherwise it will likely be a Company Share Option Plan and a non-tax-advantaged share option plan. High growth, entrepreneurial listed companies may choose a Joint Share Ownership or growth share plan for more tax efficient incentives – although there may be limitations on the use of a different class of shares for listed company incentive awards.
Listed companies can also operate an ‘all-employee’ share plan to allow participation in the company’s equity for essentially all of the company’s employees. The are two main all-employee share plans that are tax-advantaged in the UK: the Save as You Earn scheme and the Share Incentive Plan.
How to implement an incentive plan
When designing new plans to operate post IPO, you will need to keep in mind the corporate governance and regulatory requirements that apply to listed companies. These will include:
- the Listing Rules or AIM Rules;
- the UK Corporate Governance Code or other governance code for AIM IPOs;
- the UK Market Abuse Regulation; and
- Institutional Investor guidance on remuneration.
We can help you make sure that your incentives reflect the culture of your business, as well as driving your corporate strategy with the appropriate tax treatment for your employees. We can work with you to design and implement an arrangement as part of your IPO, or advise on the operation and maintenance of your existing incentives. If your business is planning on extending your plan to overseas employees, we can offer expert advice from our global network to obtain the best tax outcome for your business and employees.
Expert advice on Share Plans and Incentives
Our incentive advice to listed companies is wide-ranging and includes the following:
- Investor guidelines and best practice
- Benchmarking against comparator peer groups
- Corporate governance and regulatory requirements and restrictions
- Accounting implications
- Design of effective performance conditions
- Tax implications globally for the company and the participants
- Process mapping to ensure the efficient operation of the grant, vest and exercise process
- Design and implementation of the incentive schemes including preparation of scheme documentation
- Assistance with employee communications, which can take the form of employee guides or group presentations and Q&A sessions
- or Assistance with HMRC share plan reporting obligations.
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