Everything You Need to Know About Employee Share Schemes

As a startup founder, you know that your team is your most valuable asset. They are the ones who will help you build and grow your business. That's why it's so important to find ways to motivate and reward them for their hard work. One way to do this is to offer them a share in the company.

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Company share schemes are a great way to attract and retain top talent, and they can also help to align your team's interests with your own. When employees own a piece of the company, they are more likely to be motivated to work hard and help the business succeed.

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In this blog post, we will discuss the different types of company share schemes available, and we will provide some tips for startup founders who are considering offering a share scheme to their employees.

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There are a number of different types of share schemes available, so it's important to choose one that is right for your business. Some of the most common types of schemes include:

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• Share option schemes: Options give employees the right to buy shares in the company at a fixed price. The Enterprise Management Incentive (EMI) is the most popular employee share option scheme in the UK and is incredibly tax-efficient.
• Employee share purchase plans: This is a type of scheme that allows employees to buy shares in the company on a regular basis, usually through salary sacrifice. The shares are usually bought at a discounted price, and the employee can usually hold onto them for a certain amount of time before selling them.
• With growth shares, you can give practically anyone a stake in your business while protecting existing shareholders from dilution. That's because growth shares are issued at a hurdle rate. The hurdle is the amount the share price must be over for the recipient to benefit when they sell those shares.  

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When choosing a share scheme, there are a number of factors you need to consider, such as the size of your business, your budget, and your tax situation. 

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But before you do anything, make sure that your cap table is correct. 

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When kept clean and tidy, a cap table provides a clear view of company ownership. That clarity allows you to make informed choices - like how much equity to set aside for your share scheme in the first place. 

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All too often founders rely on spreadsheets to do this and then find themselves losing track of who has what as the company grows and more shareholders come onboard. That’s why a digital cap table is so much better. 

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With Vestd Lite, you get access to your own digital cap table as standard, as well as a suite of CoSec and equity management tools to streamline company admin.

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It's also well worth talking it through with share scheme specialists who will help you choose the right scheme for your needs.

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Share schemes can be a great way to motivate and reward your team, and they can also help to align your team's interests with your own. If you're considering offering a share scheme to your employees, be sure to do your research and choose the right scheme for your business.

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Here are some additional tips for startup founders who are considering offering a company share scheme:

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• Get your cap table in order: managing your cap table has never been easier, sign up to Vestd Lite today to get started
• Start early: The earlier you start offering a share scheme, the more time your employees will have to build up their ownership stake in the company.
• Be transparent: Be clear with your employees about the terms of the share scheme, including the vesting period, the exercise price, and the tax implications.
• Engage your employees: Help your employees understand the benefits and the value of their shares or options. Provide educational resources and digitise the scheme so they can access their own personalised dashboard. This will help to ensure that they are motivated by the scheme.
• Communicate regularly: Keep your employees informed about the performance of the company and the value of their shares. This will help to keep them engaged.

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For more information, download Vestd’s free guide to company share schemes: https://www.vestd.com/complete-share-scheme-guide

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Vestd is the UK’s original share scheme platform for startups and SMEs. Visit their website to learn more.

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