Welcome to the Investors Trading Academy talking glossary of financial terms and events.
Our word of the day is “Employee Share Schemes” Employee share schemes also known as employee
share purchase plans or employee equity schemes give employees shares in the company they
work for, or the opportunity to buy shares in the company.
Share purchase plans offer eligible employees the chance to purchase shares, sometimes through
a loan from their employer.
The shares are often paid for through salary sacrifice over a set period (for example,
6 months), or by using the dividends received on the shares.
Some share purchase plans also allow employees to pay for the shares in full, up front.
Employees on higher incomes are often eligible to receive shares as a performance bonus,
or as a form of remuneration, instead of receiving a higher salary.
The share schemes of larger companies usually offer employees 'ordinary shares' that provide
an equity investment in the company.
However, smaller companies may only offer 'pseudo' equity schemes that pay dividends
but do not give employees the rights associated with traditional share ownership, such as
the right to vote at annual general meetings.