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Launching a New Share Plan – Top Five Considerations

It may not feel like it, but if you’re looking to launch a new share plan, this may be the right moment.

During challenging times, giving company shares to employees to offset any reductions in pay, to incentivise or to simply reward hard work, can help to conserve immediate cash flow and retain talent.

We all know that a successful employee share plan drives motivation and employee satisfaction, but getting it right isn’t always easy. Now, more than ever, you need to choose the right plan for both your company and employees so you can get it off the ground in the best possible way. At Shareworks by Morgan Stanley, we work with our clients to help drive a successful share plan launch, simplify the administration process and increase participant engagement.

Here are our five things to consider when launching a new share plan:

1.     Where are you as a company?

Whether you’re a startup, high growth or mature business, the type of share awards you wish to issue will make a difference. It’s essential to design a share plan with features that best fit your company and its needs.

2.     What are you trying to achieve?

Are you looking to retain, reward or motivate employees? Or is it about encouraging growth? Your short and long-term goals will dictate the best type of share plan and approach. A key consideration to think about is cash preservation, especially given the current crisis and market volatility – a free share award, for example, could replace some cash-related reward components and help conserve short-term cash flow.

3.     What will affect the plan design?

You need to think about things like eligibility. Some share plans have to be offered to all employees, while others can be offered on a discretionary basis. Then, you also need to consider country-specific nuances and tax efficiency (employee and employer). And, what about the timing of awards in your financial calendar? You will need to take into account things like revenue and shareholder approvals, closed periods as well as filings that may need to be made before you can kick things off.

4.     What’s the budget and estimated cost of awards?

Modelling the cost of each share award to the business is key – current and projected costs of the shares will need to be factored in. There are also external costs to be considered such as legal and tax advisory support, as well as administrator costs if you like the idea of having external support and a platform to manage your share plan on.

You may also decide to use an external communication consultancy to make sure employees are aware of, and fully understand, the share plan for maximum engagement.

5.     How will you communicate the share plan launch?

Think about the best way to reach your employees. You want them to understand the purpose of the share plan, the benefits, how to join, tax implications and other guidance. Before you decide on the best approach you should consider:

  • Your employee demographics
  • Your core messages and values
  • What channels to use for wide-reaching communication
  • The frequency and timing of the communications
  • Your measures of success

So, there’s a lot to think about, especially during these times of extreme change. That’s why we’re here.

If you’d like to know more about how to successfully launch a share plan, or about how the Shareworks by Morgan Stanley platform makes it easy to manage them, get in touch.

Information made available by Shareworks by Morgan Stanley is for informational purposes only and does not constitute legal or tax advice. You should always consult with and rely on your own legal and/or tax advisor(s) as Shareworks does not provide legal or tax advice and the information is not tailored to the specific situations of your company or your employees. The information may not be current and is subject to change without notice. Shareworks makes no representations or warranties concerning the completeness or timeliness of the information for your purposes.

Solium Capital UK Limited (a wholly owned subsidiary of Morgan Stanley Delaware) is authorised and regulated by the Financial Conduct Authority.