Good staff are hard to find in today\u2019s labour market. Once you\u2019ve found talented and motivated employees, you\u2019ll want to retain them for the long term. One way to retain staff is to issue employee share schemes.<\/p>\n\n\n\n
One way of enabling employees to participate is to issue shares to the employees concerned. The advantage of this is that the interests of the shareholders, directors and employees will be more closely aligned. Furthermore, issuing shares entails relatively low costs for the company. This is because the only costs involved are those incurred by the solicitor for issuing the shares.<\/p>\n\n\n\n
If it is not desirable for employees to participate in decision-making within the company, non-voting shares are an option.<\/p>\n\n\n\n
Another option for enabling employees to participate is to issue certificates to the employees concerned. The advantage of this is that control remains with the current shareholders and the certificate holders have no voting rights. Furthermore, certificates can be transferred without the need to visit a solicitor. A disadvantage, however, is that a trust must be established through a solicitor and that various documents, including the administrative conditions, must be drawn up.<\/p>\n\n\n\n
Employee income tax<\/em><\/p>\n\n\n\n The acquisition of shares or share certificates under an employee share scheme has implications for the employee\u2019s income tax liability. If the shares constitute remuneration for work performed and the employee can achieve a disproportionately high return without incurring any real risk, this may constitute a lucrative interest. In such cases, the shares\/certificates are, in principle, classified in box 1 for the employee. The benefit derived from the shares\/certificates is then taxed at the progressive rate in box 1. In certain circumstances, it is possible to have benefits derived from a lucrative interest taxed in box 2.<\/p>\n\n\n\n If the shares\/certificates issued do not qualify as a profit-making interest, the shares will be classified under Box 2 or Box 3 for the employee.<\/p>\n\n\n\n Payroll tax<\/em><\/p>\n\n\n\n If the employee is able to purchase the shares at a lower value than their market value, or receives the shares free of charge, this constitutes remuneration in kind. The employer is required to pay payroll tax on this.<\/p>\n\n\n\n