Employee Incentive Schemes (International)

Employee Incentive Schemes (International)

A well-structured employee incentive scheme or benefit arrangement can encourage loyalty and align the interests of the employee with those of the business.

Share Plans, Long-Term Incentive Plans, Ownership Plans, Share Investment Plans, Executive Share Schemes.

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Fiduchi has helped employers establish and operate employee incentive schemes for many years. From design to the establishment and administration of schemes, we have the expertise you need.

How Fiduchi can help with your employee incentive scheme

Our client focussed service approach helps to deliver successful results. Our goal is to provide a personalised, flexible service. Our partners and us begin by working closely with you to define your needs, and then adapt our processes wherever possible to provide the best support and solutions for your organisation and employees. We work closely with relevant professional advisors including tax specialists, lawyers and remuneration specialists to support the establishment and operation of share plans of all kinds.

Our services include:

  • Online plan administration;
  • Employee communications (including online access to award information, etc);
  • Record keeping;
  • Tax reporting;
  • Company secretarial and other regulatory formalities;
  • Employee benefit trust formation and management services;
  • Dealing in shares.

What are employee incentive schemes?

Employee Incentive Schemes have evolved to take many forms. In western countries, employers commonly award shares in the employing company as a means of incentivising employees to grow the value of the business while saving cash costs. But this may not be appropriate for every employer, particularly in countries where local customs, laws and business practice have led to preferences for other types of plan. These include “phantom” share plans, cash bonus schemes, savings schemes and pension plans, “flexible benefit” plans, etc.

Key benefits of employee share schemes

Giving employees a stake in the business can provide a range of benefits to a company and its owners:

  • It can help attract key employees who may expect such benefits particularly if they have enjoyed them in other companies.
  • It can motivate employees to help grow the business and therefore the value of their stake in it.
  • It can encourage loyalty by causing those who resign during any chosen “vesting” period to lose their accumulated share rights.
  • By encouraging employees’ contribution to growth and giving them potential for realising value when they sell the shares, it eases pressure on immediate cash costs in salaries, bonuses, etc.
  • These benefits are made even more attractive by lower tax rates charged on capital gains compared with cash earnings.
  • Particularly in private companies, share plans can give business owners a means of realising part or all of their investment in the business without selling to outside investors, and of doing so at favourable tax rates.

What you need to consider when designing your employee scheme

In choosing the type(s) of plan to be offered a range of design choices should be considered to ensure that it meets the needs of the particular business, its owners and employees:

  • What proportion of the share capital of the company is to be allocated to the plan and should its value be allocated among the participants?
  • How will the shares be funded – will they be existing shares purchased from (or gifted by) current shareholders or will they be newly issued?
  • Should shares be given to employees at the outset or should options be granted to acquire them later?
  • How will employees realise the value of their shares in due course? In a quoted company the shares can normally be sold in the market but in a private company, will the sale be dependent on the company itself being sold or floated, or will the controlling shareholders buy the shares, or should the company establish and fund an “internal” market such as an employee benefit trust to act as a market and warehouse for shares?
  • Should awards be made only to one or more members of the senior management (this more likely in smaller companies) or would an “all employee” plan be suitable (more likely in larger companies once the senior management have been catered for)?
  • Should employees’ share awards include rights only to sale proceeds in due course, or also to voting rights and/or dividend rights, or some combination of these?  
  • Should vesting conditions be attached so as to encourage loyalty by causing those who leave to join competitors, etc during a vesting period (say for three to five years) to lose the value of their accumulated share rights on leaving? Should “good” leavers (who leave on retirement, or by reason of redundancy, ill health, etc) be entitled to enjoy some or all of the value accumulated in their shares?
  • Should a special class of share be created for use in the plan, for example “growth shares” whose rights to participate in any capital value is limited to any such value created above a current “hurdle” level corresponding to the current value of the company? This may ensure that the shares have minimal value at the time of award but may acquire disproportionately higher value if the value of the company grows.
  • How should the benefits of the plan be communicated to the target population, so as to ensure that the value on offer is fully appreciated?

Other types of employee share scheme

Depending on the country in which the employees are based, the head office location of the employer, and local customs and laws, a wide variety of types of employee incentive plan may be available.

In some countries, local customs or securities laws make share plans impractical and other solutions have evolved. These generally deliver cash earnings or pensions and may or may not involve trusts or other investment vehicles and external professional administration. Such plans can include:

“Phantom” share plans

These involve cash remuneration calculated by reference to movements in the value of shares in the employing company, paid along with regular earnings

Cash bonus plans

These inevitably involve a range of design choices and we can guide the employer through the issues arising

Savings and pension plans

Many countries impose an obligation on the employer to provide some form of share plan, savings or pension plan, outside any local social security system. Employers may limit provision to the minimum necessary under these obligatory plans, but many go further and offer more generous benefits. Again design choices are required and we can assist with the issues arising.

Whatever type of incentive plan is adopted, the time and resources needed to administer the plan and deal with employee communications can be burdensome. We have assisted in administering a wide variety of these international plans through bespoke arrangements, including online administration where appropriate, to provide a consistent, high quality service while keeping costs to a minimum.


Testimonials

"THANK YOU TO OUR GUARDIANS!

I would like to extend a BIG thank you to the Fiduchi team for taking such good care of me and my business. It's reassuring to know that there are some guardian angels out there to look after us."

Founder & CEO - SUPERLUXE Events

"Thank you very much for your professional assistance (and patience) in helping us transfer our shares and assets into the new Trust. I know that it has taken longer than expected. Still, your professionalism and continued support have helped us achieve the desired outcome."

Chairman and CEO

"My sincere thanks for the assistance you have provided the advisory committee by coordinating directly with the charity to formalise an agreed donation plan."

Private Client (Charity)

"Many, many thanks for your hard work and speed at setting up our client's Private Investment Company in just 24hrs! Your flexibility and communication throughout the whole process have been appreciated, and the feedback has been tremendous......

Thank you."

Major UK Law Firm

"Thank you, everyone, for delivering this significant re-structure to our family assets and within a very tight timeframe.

Great to get this finalised!"

Mr. C - Private Client

"THANK YOU TO OUR GUARDIANS!

I would like to extend a BIG thank you to the Fiduchi team for taking such good care of me and my business. It's reassuring to know that there are some guardian angels out there to look after us."

Founder & CEO - SUPERLUXE Events

"Thank you Fiduchi for the design and implementation of our corporate pension scheme. Your expertise combined with technological platforms, have allowed us to create a bespoke retirement savings product which allows our employees. Throughout the whole process you have proven to be professional, skilful and enjoyable partner to work with."

Mr. R E - Managing Partner - H Ltd.

"We consider Fiduchi an important strategic partner of ours. Over the years they have proven themselves to be professional and extremely thorough. Combined with this professionalism, they are always a pleasure to deal with and we are pleased with their service levels."

Mr. P.E, Managing Director, W Ltd.

“I am very impressed with the professionalism and efficiency Fiduchi Limited demonstrated during the establishment of our employee benefit trust. They coordinated the process seamlessly and provided us with valuable advice and guidance to ensure compliance with our regulatory and legal responsibilities. Throughout my engagement with the team, I have found them to be approachable and easy to work with.”

Mr. P.B. FE Ltd.

"Thank you for helping us with the establishment of our real estate fund."

Startup Fund Manager

"Thank you so much for helping my client register their vessel with the Red Ensign Group and all the other advice and support you provided!"

Trusted advisor to Yacht Owner.

"Fiduchi's yacht team provides a first-class service! In particular with assisting us with our crew banking requirements and payroll services. Whenever we need assistance, they are just a phone call away!"

Superyacht Captain

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