Options or Shares: What’s Right for Your Employee Ownership Scheme?

Considering switching your business to an Employee Ownership model? You are not alone. More and more savvy business owners are opting for the EO structure, in order to reward their valued teams, create a clear path for succession and to benefit from tax incentives. If you are deliberating over the structure your EO scheme should take, here are some pointers.

Under an Employee Share Scheme, employees will hold (or have the option to hold) shares in the company personally – typically together with other shareholders. There are several ways in which an employee share scheme can operate:

Gifted shares

You can choose to gift shares to your employees who will immediately become shareholders in the company, receiving all the benefits that come with owning shares. In most cases the gifted shares will be subject to income tax, although there are several approaches available that don’t involve a tax bill for the employees.

Employee share purchase

Employee share purchasing is the most direct route that you can choose, where your employees will immediately benefit from dividends and share value increases after purchasing shares themselves. This choice gives employees real ownership almost instantaneously and recipients can receive dividends and even voting rights. However, it’s important to consider that employees tend not to have funds available at the outset and companies often don’t want the inconvenience of buying back shares if employees leave.

Share options

You can choose to provide share options, which allows your employees to purchase shares in the future at a price that is fixed today. An EMI option scheme is a good choice for those wanting to implement a tax efficient scheme for employees if your company is eligible. If you choose share options, there is little risk for your employees and tax liability is deferred; if the share price increases over time then employees could make a sizeable profit when it comes to selling shares, and if the share price decreases then there is no obligation for them to purchase shares.


Your objectives for the share scheme, and the employees themselves, will dictate whether shares or options are the most appropriate choice for your company. Whether purchasing shares or receiving options, Employee Share Schemes are shown to help businesses achieve highly valuable benefits and increase overall business value. Recruiting and retaining top talent is incredibly valuable for any company, and share schemes have the potential to reduce long-term employment costs, qualify for significant tax breaks and facilitate succession planning.

Choosing and implementing an Employee Share Scheme takes a lot of planning. We can guide you through the entire process, so you get the right scheme in place for your business and employees.

Contact us now for a fully-funded options appraisal.

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