During the past decade, there has been a marked increase by corporate employers in the use of employee benefit schemes. These schemes are often complex and are typically established in tax-neutral jurisdictions under a trustee style of structure and where there would be easy access to appropriate levels of administrative expertise. This type of arm’s length, outsourced arrangement is also often seen as more reassuring for staff.
By their nature, employee benefit scheme can come in all shapes and sizes, some of which are as follows:
- Employee Benefit Trusts – trusts settled by employers, typically for the benefit of past, present or future employees plus dependents and relations.
- Share Option Plans – Employees are given the right to buy shares in the future at a (usually discounted) price calculated at the time the rights are granted.
- Profit Sharing Share Plans – Employees receive shares free of charge, like a bonus. The shares are held by a Plan trustee and released to employees at a later date.
- Share Incentive Plans (SIPs) – A UK approved plan with various different structuring options but which normally includes the shares being held by a Plan trustee for later release. The Plan usually carries tax and national insurance benefits.
- Long-Term Incentive Plans (LTIPs) – where employees receive free shares in a company, free of charge, usually linked to a defined period of time and performance criteria.
- Employee Share Ownership Plans (ESOPs) – a trust where the trustees purchase and hold shares in the employer company for the benefit of company employees.
- Offshore Employment Companies – these employ executives and sub-contract their services to the companies using their services.
- Deferred Compensation Plans – defer or avoid national and local remuneration taxes whilst working at home and abroad, by transferring deferred remuneration assets to a trust.
- Offshore Pension Plans – a flexible solution to the savings and pension requirements of executives who may be based in many different countries throughout their working lives.
Employee benefit schemes can also potentially provide a number of advantages to an employer, including:
- To attract, retain, motivate and reward employees
- To provide employees (and also companies) with a tax efficient, long term savings plan
- To enable the payment of discretionary bonuses to reward employees
- To provide employees with interest free or interest bearing loans
- To enable employees and senior executives to become shareholders in the business, whilst retaining an element of control over the shares
- To structure golden handcuff transactions
- To hold shares earmarked for future employee share incentive arrangements
- To create a market for shares which would otherwise not exist
Cavendish Fiduciary has substantial in house expertise and practical experience on the establishment and administration of employee benefit structures and can offer competitive cost structures for any size of scheme.
Please contact either of the following members of our team with any Employee Benefit Scheme enquiries: