After reading part one of this start-ups series, we know you’ll be eager to hear about how Employment Share Schemes (‘ESS’) work. We consider the benefits of having your cake and sharing it amongst employees.
An ESS is an invitation to employees to acquire shares in the company they work at. When short of capital or unable to pay salaries above market rates, it is not uncommon for a business to offer shares to employees in lieu of salary (also known as ‘sweat capital’). However, shares cannot be offered to an employee in lieu of payment of the federal minimum wage.
If an employer wants to offer shares to employees via an ESS, it can either:
It’s also possible for the business to offer shares as part of a performance bonus. If employees reach pre-agreed targets (eg sales targets, securing new clients), shares can be issued in lieu of a bonus payment or other financial incentives.
So, what are the benefits of an ESS?
Some negatives of an ESS include:
We know that every business is unique, so deciding whether to establish an ESS depends on the intricacies of the business. For tailor-made advice, contact a Bespoke corporate lawyer.
Posted on: 1 May 2018