Employee share schemes
When done right, distributing employee shares can significantly increase motivation and commitment of your staff and they can also serve as an alternative financing method. At the same time, they reduce regular staff costs. While an employee share scheme is easily realised (by way of an individual contract) when only one staff member is concerned, the establishment of a uniform system applicable to all employees requires a thought-through system of contracts.
Apart from the fundamental question whether employees should have a stake in only the profits or the start-up’s entire capital, you must also decide which employee share scheme most closely meets the expectations of all parties involved (pooling, options, shadow stocks, etc.). And the ideal time to set up an employee share scheme also merits careful consideration, particularly in light of the tax consequences such a step would have for both the company and its staff members.