Your employees are the lifeline of your business. Keeping them motivated and productive is vital for your business development and growth. One effective way to ensure outstanding performance from your employees is to devise smart employee incentive schemes. Bonuses or incentives spread feel good vibes and boost employee satisfaction.
If you are looking to provide the best employee incentive scheme, you need to have a proper understanding of the latest updates regarding incentive schemes for employees.
Foremost issue you face with an employee incentive scheme is that it should comply with the requirements detailed in the Corporations Act disclosure. According to the act, attaché a proper disclosure document with the options and shares you offer as incentives to your employees.
There are however certain exemptions such as
- Options or shares issued to senior managers
- Issue of options or shares to a maximum of 20 persons within a 12 month span to raise over $2 million excluding senior manager shares and other exemption clauses.
- Issue of options or shares to provide relief based on CO14/1001, which is an ASIC class order published for disclosure relief in employee incentive schemes, provided particular conditions are met with.
The important requirements you have to meet include
- Offers are only for ordinary voting paid shares or options related to the paid voting shares
- The offer should have only nominal monetary value and not go over $5,000 per employee in a year.
- The offer should not be over 20% of the issuer’s issued capital when considering the aggregate offers given as per ASIC over 3 years.
- The offer valuation estimation should take into the valuation resolution of the director which has disclosure of valuation method
- The offer documents should include solvency resolution of the director and financial statements (audited) or it should provide a special financial report with a front page warning about value realisation and illiquidity.
There are several other related regulations that you should know. Having legal advice and guidance on the intricate details will help you devise an effective scheme that benefits your company and employees.
Employee Share Schemes and their benefits to employees
Employee share schemes or equity schemes provide eligible employees to buy shares as a loan from the employer. You pay the shares via salary or using the share dividends. Some schemes allow the employees to pay upfront for the shares. Some employees receive the shares as a bonus for their performance or as salary in place of receiving a higher salary.
How employees benefit
The schemes help motivate, keep and attract employees as they help align the interests of the shareholders with that of the employees. Further if the company performance is good, they can benefit financially
Employees get the shares without brokerage charges or at discounted rates.
They may also get tax benefits dependent on the share scheme type.
The drawbacks with an incentive scheme
Because the incentives are as shares or options, employees are limited for what they can sell or buy the company shares. Further they have to pay the shares in full to sell and benefit from the shares. Or the company may insist the employee return the shares when they exit the company.
How Melbourne Commercial Lawyers can assist you?
The dynamic Melbourne Commercial lawyer team provides a comprehensive legal advice and litigation services making it a one stop solution. Any legal challenges you face regarding employee incentive scheme and the related regulations, our team of professional and expert lawyers are ready to help you. We provide guidance related to RG 49 (Regulatory Guide 49) and the Corporations Act 2001 and various other relevant regulations put forth by ASIC.
Whether you are a company looking to provide a beneficial and legal employee incentive scheme for your employees, or if you are an employee wanting to know more about the scheme and its benefits we are here to help.
We advise on compliance costs, impacts and other benefits ensuring you get the best advantages the scheme can provide.
Set up a consultation with us now to know how you can benefit from the scheme. Contact us now!