Joel Wheeler, Employee Incentives Senior Manager, discusses how share incentives are a powerful and positive tool, aligning employers and employees and creating long term value for all.

Share incentives: long term value for employers and employees

Share incentives are a vital tool in today’s business environment. Driving success and deepening loyalty, they benefit employers and employees alike. Also referred to as share equity or equity compensation, they play a crucial role for both a company and its employees by fostering a mutually beneficial relationship.

How? They help employers attract and retain talent especially in competitive industries or startups, and they offer employees a financial stake in the company's performance, creating a sense of ownership and pride.

A powerful tool for employers
Share incentives are a powerful tool for firms to attract and retain top talent. Startups and smaller companies may not have the financial resources to offer large salaries or generous bonuses, so share equity becomes a key incentive.

By offering equity-based compensation in addition to other remuneration, employers can provide employees with the potential for significant financial rewards as the company grows, thus making the organisation more attractive to potential hires.

Furthermore, share equity aligns the interests of employees with the success of the company and when employees own a piece of the company, they are more likely to be motivated to work hard, innovate and contribute to the company’s growth.

As shareholders, employees are directly impacted by the company’s performance and they have a vested interest in improving efficiency, increasing profitability and fostering a positive company culture. This sense of ownership encourages employees to think and act like business owners, contributing to higher productivity and better long-term outcomes for the company.

Share equity also plays a key role in employee retention. By offering equity as part of a compensation package, employers create an incentive for employees to remain with the company and help it grow over time. As share awards typically vest over a period of time, employees must stay with the company to realise the full value of their equity compensation. This encourages long-term loyalty, reduces turnover and creates a significant cost saving in terms of recruitment, training and lost productivity.

Employers may also be able to claim a statutory corporation tax deduction in respect of share awards made to employees, subject to relevant conditions being met.

Giving employees a stake in the business
For employees, share equity provides a direct stake in the company’s future success. As the company grows and its value increases, employees with equity compensation can benefit financially. This creates a strong incentive for employees to contribute to the company’s growth and success, as their personal financial outcomes are directly tied to the company’s performance. Equity compensation can provide employees with the opportunity to build significant wealth, especially if the company experiences rapid growth, undertakes an exit (perhaps via private equity or trade sale) or decides to go public.

In addition to the financial benefits, share equity fosters a sense of ownership and pride in the company. Employees who hold shares in the company are more likely to feel personally invested in its success. This connection often leads to higher engagement, loyalty and job satisfaction. When employees are financial stakeholders, they are more likely to go above and beyond in their roles, driving company success.

Tax advantaged plans (previously called “approved plans”) allow employees to enjoy tax benefits from their shares. Over time, the accumulation of equity can provide financial security and retirement savings, making it an appealing part of an employee’s overall compensation package.

Such plans include Enterprise Management Incentive (EMI), Company Share Option Plan (CSOP), Share Incentive Plan (SIP) and Save As You Earn (SAYE) or Sharesave Plan.

Long term value for all
Share incentives are a powerful and positive tool, creating alignment between employers and employees.

Employers achieve a strategic approach to attract, retain and motivate employees while fostering a culture of ownership and accountability. At the same time, employees gain a deeper sense of connection to the company’s success and have the opportunity to earn significant financial rewards.

Share incentives play a key role in driving the overall success of the company, fostering growth and innovation and creating long-term value for both employers and employees.

 Find out more about how VG can help your company with its share incentives. Talk to Joel about your share incentives.