In businesses, mainly private, motivation of employees goes a long way in utilizing employees’ potential, retaining hardworking and sincere employees, and achieving desired growth in terms of profits and overall status of the organization.
There can be innumerable ways for motivating and recognizing employees’ contribution in achieving organizational goals yet for most of the business organization Employees Share Schemes have emerged as most attractive motivational tools.
What is the Employees’ Share Scheme?
In Employees Share Scheme, the eligible employees are issued company’s shares to offer ownership and recognize their contribution in the company. The objective behind giving company’s shares is to partly compensate employees instead of full cash compensation.
The Employees Share Scheme in Australia, especially for the start-ups, has proved extremely beneficial in involving employees for faster and assured growth of business.
In order to increase employees’ participation in the company’s development and raise their commitment level, business organizations can issue two common types of shares i.e. Ordinary Shares or Growth Shares.
As per the Australian Taxation Office, ESS is beneficial for the employees as they are issued shares at discounted price and have the opportunity i.e. right or option to buy company’s shares in future. Also, as per the legislation, most of the employees are eligible for special tax concessions.
Benefits of Employees Share Scheme
ESS is not only beneficial for the employees but for employers as well. Although employers will have to share some part of the ownership with employees but in the longer run ESS will become the mainstay in acquiring financial stability and employees’ loyalty towards the organization.
ESS can benefit employers in many ways for employers, as it can:
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- Inculcate sense of ownership and belonging among employees
- Motivate employees to work with more dedication and be more productive
- Help retain key employees and reducing the employees’ turnover rate
- Increase cash flow and raise more working capital
- Enable employer to expand business and thereby create more avenue for business and employees’ growth
- Be an excellent tax efficient remuneration for employees
This cost-effective compensation package in the form of ESS can enthuse the employees to work for the organization, easily help align the employee and employer’s interests and strengthen mutual relations and trust between them.
Legal requirements of Employee Share Scheme
Business organizations desirous of implementing ESS are required to fulfil various modalities as per the guidelines of Australian Taxation Office. There are many legal as well as regulatory requirements to consider by the employers while creating an employee share scheme in Australia.
For creating an employee share scheme in Australia, employers are supposed to:
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- Adhere to the provisions of Corporation Act 2001
- List the company as per ASX rules i.e. Exchange Listing rules
- Prepare company’s constitution
- Maintain Accounting Standards
- Comply to taxation laws including income tax, capital gains tax and fringe benefits tax etc.
- While creating an employee share scheme; employers are required to fulfil all disclosure or prospectus requirements including disclosure exemptions and also follow employee share scheme reporting to employees and ATO
For all these official and regulatory requirements for creating an employee share scheme for your organization, it is always sensible to engage professional taxation expert company like Mosaic Tax Legal in Australia that can help you in creating an employee share scheme without any error and any problem with the ATO.
