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Laws to Encourage Broad-Based Employee Ownership Outside the U.S.

Corey Rosen
National Center for Employee Ownership
2013


This article provides a snapshot of laws in countries outside the U.S. specifically designed to encourage broad-based employee ownership. It does not discuss stock options, restricted stock, stock appreciation rights, or phantom stock as these plans are rarely used outside the U.S. for broad-based employee ownership and no country has laws that specifically encourage their use for these purposes. A good resource for the laws on this subject can be found on the Web site of the international law firm of Baker & McKenzie, which publishes an updated 40-country matrix on the topic. There is one exception to this rule, namely in Ireland which has an approved share option plan for broad-based participation.

Also not included are the employee ownership privatization programs that were very common in the former Soviet-bloc countries during the 1980s and 1990s. Those programs are largely complete and few of the employee owned companies that resulted remain employee owned. China has also used employee ownership extensively for this purpose at the provincial level but, unfortunately, there are no recent or reliable sources describing the extent of these programs or their rules.

The information gathered here comes from the PEPPER IV Report, a private academic 2009 on employee ownership in Europe, country employee ownership associations in the U.K. and Australia, government sources in South Africa, and the Web. We have made every effort to find the most recent information and to update the PEPPER IV Report where needed. However, we urge caution on information on plans in Continental Europe other than Germany, Austria, Spain, and France, where we were able to find more current updates. Laws in other countries may have changed, and some observers have said there are inaccuracies in the report.

It might seem like a fairly straightforward task to find laws and data on this subject. For Europe, Australia, and the UK, it is, even though the data focus mostly on public companies (this is less of an issue than it would be in the U.S. because almost all employee ownership is on these companies there). Outside of these countries, however, it is very difficult. Only a handful of countries have anything like the NCEO, most notably the European Federation of Employee Shareholders, based in Brussels; the Employee Ownership Association in the UK; and the Australian Ownership Association. Academic research on the topic is scant except in the UK. The lack of strong data, of course, reflects the fact that employee ownership has simply not gained the traction in other countries it has here, albeit there is growing interest, especially in Europe, China, and Southern Africa.

General Models for Employee Ownership

Outside of privatization plans, employee ownership legislation focuses on two approaches: employee stock purchase plans and free share plans. Generally, companies can deduct the costs of contributions or discounts on stock and employees can at least defer, and sometimes avoid, taxation. The most notable contrast to the U.S. is the absence of ESOP-type arrangements aimed at the long-term holding of shares and incentives to owners of closely held companies to sell a substantial or complete stake to the trust. As a result, majority employee owned companies outside the U.S. are relatively rare and employee ownership is generally found almost entirely in listed companies with employees owning a small percentage of shares.

The difficulty with the typical models that do not have some kind of share pooling mechanism, such as an ESOP trust in the U.S., is that relying on employees to purchase shares, even if they are getting a match or a discount, almost always means that:

Because of all this, we believe that countries that want sustained, substantial, and broad employee ownership in companies need to provide ways that the ownership is not based on employees making decisions to use current income to buy shares, but rather on company contributions with tax benefits for the companies and/or sellers to employee ownership plans doing this. The ownership plan also needs to pool ownership and allocate shares to individual employees during their tenure with the firm.

One intriguing variation on stock purchase plans used by some companies in Europe (mostly France) allows employees to buy shares with a company-backed bank loan and repay the loan in a fixed number of shares. Discounts on the purchases are often offered. Lenders may hedge the loan by buying put and call options on the shares and/or the company may provide some base guarantee. The plans offer the opportunity for gains at no risk and have been very popular with employees. Although not a creature of any specific law, the model is one that countries looking to set up rules might consider encouraging.

In the next sections, we summarize the approaches of major groupings of countries. That is followed by a country-by-country matrix describing the plans and their rules.

The United Kingdom, Ireland, Australia, Canada, and New Zealand

Ireland, The UK, Australia, New Zealand all have multiple laws to encourage widespread employee ownership, but Canada does not. In the UK, since 2011, leaders of all three political parties have made creating a "John Lewis" economy a major political focus, one that has received substantial press attention. John Lewis is an iconic UK retailer with about 70,000 employees that is entirely owned through a trust set up to hold shares permanently in the name of employees. The employees never actually get the shares, but do get payments of earnings from them. The company has been a stellar performer and its customer service legendary. There already are programs to encourage broad employee ownership in the UK, most notably the Save as You Earn program, a stock purchase plan that provides employees with tax savings on shares they can buy at a discount provided certain rules are met, and a Share Incentive Plan, which provides employers and employees with tax incentives for corporate donations of shares or, more commonly, share matches to employee deferrals. Ireland has very similar programs but also has a plan for broad-based stock options that offers some tax benefits to employees and a plan modeled generally after the U.S. ESOP. Australia's plans focus on tax incentives for share contributions and discounts for employees purchases.

In the UK, the Cameron government has made a major push for "mutualisation," the spin-off of government services to employee, community, or jointly owned companies. Employees have the right to offer to bid for these services and may be given preferential treatment. A few such transactions have taken place since 2011.

Employee ownership is common in all these countries. In the UK and Ireland, most of the large listed companies offer some kind of broad share plan, as well as many smaller companies. The plans are only used by a small percentage of companies in Australia and an even smaller one in New Zealand, however. Overall, in the UK about one million employees are in broad-based plans. We could not find recent data on Ireland, but the percentage is likely smaller.

There are a number of majority employee owned companies, including some major ones, such as John Lewis, Arup (a multinational engineering company), and Tullis Russell (a large paper manufacturer). These companies each have their own idiosyncratic plan structures and ere created largely for philosophical reasons. There are also a number of smaller worker cooperatives in the UK, Ireland, Canada, and Australia.

Continental Europe

The most authoritative and comprehensive source of information about the forms and extent of employee ownership in the Pepper Report, a publication of the European Economic Commission. The most recent report, the fourth edition, was published in 2010. In what follows, we use that report as a guide to the programs on the continent that specifically were meant to encourage employee ownership, updating them as needed based on more recent information.

In general, continental European countries do not have the kinds of incentives for employee ownership that can be found in the other countries reported on here. There is fairly widespread employee ownership in these countries, primarily (and sometimes almost exclusively) in public companies. Based on data gathered primarily from companies over 200 employees (and with a bias towards traded firms, although not all respondents were traded), by the late 2000's, about 5% to 15% of companies in most European countries offered some kind of employee ownership plan, with Poland, France, Denmark, Belgium, and Croatia all at the 20% or higher level (Croation employee ownership is almost entirely a function of privatization).

The large majority of plans are share purchase plans, often with some kind of discount or tax incentive. Some countries, most notably France, have profit sharing plans (mandatory in France for firms over a certain size) that can be invested in company stock and that also offer some tax incentives for employers and employees. Overall, employee holdings in these plans averages about 3% to 5% of total equity. The Hollande government announced n 2012 that it would propose major new incentives for broad employee ownership.

While the number of plans is large, the percentage of employees either offered the plans or, if offered choose to participate, is relatively small. In France and Croatia, over 50% are covered, but most countries are in the 10% to 20% range. Overall, about 1% to 3% of all private sector employees are in some kind of plan, with higher numbers in France. Even in the subsample of the largest firms offering broad plans, only about 15% to 35% typically participate, somewhat worse than U.S. numbers for employee stock purchase plans.

In Eastern Europe, most former non-market states used broad employee ownership extensively as part of the privatization process. However, it was rare for the governments or the companies to view employee ownership as anything more than a transitional vehicle (this was also true in the former Soviet Union, where widespread employee ownership was the most common vehicle for privatization but almost never lasted beyond several years). The process almost always involved employees buying shares very cheaply and then being able to sell them some time later. Often, the goal of governments was explicitly to use employee ownership simply as a way to move assets over time into more concentrated capital ownership hands and out of the hands of state apparatchiki. The post-privatization period was economically difficult for these countries, and few of the employee ownership companies had access to adequate capital to deal with economic challenges. The privatization process highlights how unstable a form individual shareholdings is unless there are ongoing incentives for new employees to buy shares.

There are no reliable data on how many companies are majority owned by a broad group of employees, but there is no reason to think the number is more than several hundred non-worker cooperative firms. There are tens of thousands of worker cooperatives, however, mostly in Spain and Italy. Spain has specific laws to encourage worker cooperatives.

The European Commission has strongly endorsed the idea of moving forward on employee ownership. In the 2010 report, it noted that:

"The European Parliament called on the Commission to submit studies on the issues raised in its Resolution of 5 June 2003. Among these were the feasibility of financial participation in small and medium-sized enterprises and the possibility of implementing in
other EU Member States share ownership schemes based on the ESOP (Employee Stock Ownership Plan)."

A budget heading was voted by the European Parliament for a pilot
project for the setting up in 2013 of a Center for Employee ownership in each Member State of the EU, to function in many ways as the NCEO does in the U.S.

Korea

In 2012, there were almost 3,000 employee ownership plans in Korean covering 1.2 million workers. The plans are in both public and private companies. While the laws encouraging employee ownership are significant, the plans typically only own about 1.5% of the shares.

South Africa, Kenya, and Zimbabwe

South Africa has a program to give companies preference for sharing ownership with employees South Africa traditionally defined as black (a term that includes most non-whites of any origin), but now described as "previously disadvantaged people/populations." These can be employees or non-employees. Recent changes in the law have given companies more credit for having broad-based plans and perhaps a few dozen large companies, especially in mining, have set up these plans. They are typically employer trusts funded by the company that hold about 5% of the shares. Some companies also get financing from the government's economic development agency that is contingent on an employee ownership plan, often a leveraged trust that repays the loan from dividends (this can be problematic when they are inadequate). As of 2012, South Africa is in the early stages of considering ways to provide much more substantial encouragement to employee ownership.

Kenya and Zimbabwe both have programs to encourage or, in Zimbabwe's case, require foreign companies to set up substantial employee ownership programs or face nationalization. The plans typically operate through employer funded trusts.

China

China has used employee ownership extensively in its move towards a market economy. Many provincial government have provided preference for employee ownership, although the central government has not (even tough Deng Xiaoping once called the idea "socialism with Chinese characteristics"). As best we can tell, these plans are typically trusts funded largely by employee purchases of shares, often at a discount, but there are no reliable sources on how this is being done or how often it is used.

Recently, China has proposed to allow employees to buy shares through an employee association. There would be no tax advantages to doing this, and they would have to be held for three years, so it is unclear what benefit this provides. As this was being written, the proposal was being reconsidered.
CountryPlanTax IncentivesRules
Australia$1,000 share grantsNo tax on grant to employee.

No capital gains tax on sale.

Deductible to employer.
Applies only to employees with an Adjusted Taxable Income of less than $180,000 (Australian) per annum. Maximum award $1,000 worth of shares, rights or options.

Employee can receive up to $1,000 worth of shares, rights or options income tax and capital gains tax free
Free or matching sharesSalary sacrifice shares are not taxable until those shares become unrestricted, typically three years after the shares are purchased.

Any free or matching shares must be subject to forfeiture (vesting), often 2 years. These shares are taxed when the vesting condition is met (provided there is no further restriction on sale); if there is a further restriction on sale then the shares are taxable when that restriction is first lifted. If an employee leaves before these events then tax is on cessation of employment.

Taxation event triggers ordinary income tax treatment.
Companies can provide free or matching shares to employees up to $5,000 per year.

The most common approach is that employees put aside some salary to buy shares and receive one matching share. The total cannot exceed $5,000 per year. The sacrifice shares are not taxable until those shares become unrestricted (can be sold) and this is typically three years after the shares are purchased. Any free or matching shares must be subject to forfeiture (vesting); commonly an employee loses the shares if they leave the company before e.g. two years. These shares are taxed when the vesting condition is met (provided there is no further restriction on sale); if there is a further restriction on sale then the shares are taxable when that restriction is first lifted. If an employee leaves before these events then tax is on cessation of employment.

Can be offered to a limited group of employees but most often offered broadly.
AustriaShare purchase plansNo employee income or social insurance tax on any discount offered up to 1,460 (as of 2010) in purchased shares.

Employer exempt from social insurance tax on discount value.

On sale, employee can pay either capital gains taxes of one half of the normal personal income tax. If the company can buy back the shares at its discretion, full income and social insurance taxes are due.
Shareholders must approve issuance of shares.

Must be open to all current and retired employees.

Shares can be offered at a discount.
Share grants1,000 exemption on the issuance of an award or a tax deferral on any discount for up to 10 years. Plan must be open to at least 75% of full-time employees with three years or more of service be capped at 5% of total shares. There is a 1,000 exemption on the issuance of an award or a tax deferral on any discount for up to 10 years.
BelgiumGrants of shares or optionsShares or options held for over two years qualify for a special 15 tax rate on the gain at saleCompany can buy up to 20% of stock without approval of General Shareholder Assembly
Share purchase plansShares held for over two years qualify for a special 15 tax rate on the gain at saleCompanies can arrange loans to finance purchases.

Discounts can be offered up to 20%
CanadaBritish Columbia, Saskatchewan, Manitoba, Quebec, and New Brunswick tax credit programIn B.C., the most active program, employees eligible for a 20% tax credit used to buy employer shares. Other provinces have less generous plans.Only available to BC companies where 25% or more of their wages are in the province and that have $500 million or less in assets.

Share offer must be made to all employees equally or based on length of service.

Other provinces have similar rules but plans are less commonly used.

ChinaShare purchase plansNo tax incentivesEmployees of publicly traded companies can use a portion of their compensation to purchase shares in their companies. The shares would be held in a trust and could be sold after 36 months.

The new rules were proposed in 2012. As this went to press, changes to the rules were being contemplated, particularly as to whether there should be some advantage to employees buying shares this way rather than on the market.
CanadaBritish Columbia tax credit programEmployees eligible for a 20% tax credit used to buy employer shares.Only available to BC companies where 25% or more of their wages are in the province and that have $500 million or less in assets.

Share offer must be made to all employees equally or based on length of service.

Czech RepublicShare purchase plansNoneCompanies can offer a 5% discount and can help finance share purchases.
DenmarkShare purchase plansEmployee pays no tax on grant and company can take a deduction for the discount it offers
Price for shares must be paid in full at exercise.

Shares must be held in trust for five years of more from the time of grant.

Plan must be broad-based and exclude management.
FinlandShare
purchase plans
Discounts offered on stock of 10% or less are not taxable.

30% of dividends paid to employees in public companies are not taxed and the remainder is taxed as a capital gain.

Dividends up to 9% of profit paid to employees in private companies are not taxable.

Stock can be issued to employees at a discount.
Personnel fundsFund does not pay tax on earnings.

20% of distributions to employees are not taxable.

Company contributions are tax deductible.
Personnel funds are profit sharing trusts that can be established by a 2/3rds vote of employees in companies of 30 or more employees.

Company profits can be contributed to the fund, where they are allocated based on relative compensation or a more level formula.

Account balances can be invested in company stock or other investments at the discretion of each employee.

Accounts are held in trust until termination, when the employee can choose to have them distributed in a lump-sum or over four years.

Employees vest in plan over up to five years.
FranceShare grantsNo income tax on grant; social insurance taxes paid based on 30% of grant value. There is no tax on vesting.

On sale, the employees pay tax at the employee's election at a rate of either 30% of the value of award at vesting plus 15.5% for social taxes, or the employees marginal rate for the vested value plus 15.5% for social insurance. (The rate is 10% for grants made after 2007).
Capital gains taxes are due at sale on the increase in value from the vesting value.
Employer can deduct grants as compensation.
Listed and non-listed companies can transfer free shares to employees. Shares must vest over two years or more and must be held for two years after vesting. Total shares cannot exceed 10% of total capital.

Plans must not be discriminatory in their benefits, but are not required to be issued to most or all employees (but normally are).
Profit sharing plansPlans are compulsory for firms over 50 employees and voluntary for smaller firms. Contributions are deductible to the employer and non-taxable to employer, but reduced social insurance taxes must be paid. Assets must be held for five years. While not used directly for share ownership plans, funds from these plans can be transferred into share purchase programs of company savings programs where the employee uses assets to buy shares.
Stock purchase plansThe employee is taxed on any spread on shares purchased when the right to buy the shares is exercised. Both income and social insurance taxes apply.
May be offered to all or selected employees at discounts selected by employer.

Employees can use funds from profit sharing plans to buy stock.
Company savings programsNo income tax to employee on deferred income, but 20% social insurance tax due based on value of deferral.

No income tax to employee on company contributions to the plan at grant. Companies can deduct the value of the award from their tax obligations, but a 20% social insurance tax due based on value of deferral.
Can be used to invest in multiple investments, sometimes including company shares.

Plans must be available to all employees after three months service. Where there is employee representation, plans must be negotiated.

Employees can use up to 25% of their compensation annually for the plans. Funds from a profit sharing plan can be used to participate in the share purchase plan.

Companies can make up to an 8% of the French social security cap, up to three times the employee contribution. In addition, companies can make contributions of up to 80% of the cost of buying shares for additional purchases, also capped at 8% of the social security cap.
Fonds Commune du Placement Enterprise (employee buyout funds)Employees pay no taxes on shares held for at least five years, subject to certain exceptions, such as termination. Companies can get tax deductions for contributions to the plan.
Plans are a private company only variant of profit sharing plans.

A trust fund can be set up to buy out a company funded by employee contributions, dividends, and/or employee purchases. At least 15 employees must participate (or one-0third of employees if there are under 50 employees.).

While this structure has been available since 2006, it has not yet been used.
GermanyShare grantsGerman employees can receive an annual tax credit of 360 on the discount they receive on the purchase of shares in their company. Companies can set discounts, but generally set discounts at 20%.

Plans are only in public companies. German law makes broad employee ownership in closely held companies difficult.
GreeceStock grantsEmployees are not taxed at grant and company can take a tax deduction. On sale, employees are taxed at lower gift tax rates rather than personal income tax rates.Available only for listed companies and limited to 10% of shares or 20% of a new issue of shares.
HungaryPrivatization ESOPsNo specific tax incentives.Modeled loosely on U.S. ESOPs, the law allows employees to set up an ESOP trust to acquire state owned companies. The trusts can buy the shares at a reduced price, with a loan, or in installment payments. Discounted shares can be offered at up to 50% of the price for up to 15% of the company's value.

The ESOP dissolves when the assets are fully acquired and shares are distributed, then taxed when sold. Few privatization efforts have resulted in ESOPs persisting after the acquisition.

All employees must be able to participate.

Many companies used this approach in the privatization process, but very few of the ESOPs were retained and the law is largely irrelevant. If still theoretically available.
ESOPs outside privatizationCompanies can deduct up to 20% of the cost of funding a plan.

Shares provided to employees are tax free at the time they are put into the plan but are at capital gains rates on any increases in value when shares are sold.
At least 40% of the employees must agree to participate in the plan.

Plans can be funded by the company, by employee purchases, and/or by a loan to the plan, or both.

Full-time employees must be eligible to be in the plan, but company by-laws can require up to five years of service first.

The ESOP dissolves when all the shares are acquired.
Share purchase programsEmployee taxed on spread between purchase price at sale price.

The first shares for up to 500,000 Florins are not taxed at exercise or vesting, but are for amounts over that.

No corporate tax incentives for the discount.
Companies can offer shares at full or discounted price up to 90%.

At least 10% of employees must participate in the plan. Management cannot constitute more than 25% of the participants in the plan nor hold more than 50% of the shares.

Shares must vest over three years or more and be held for two years after acquisition to qualify for tax benefits.
IrelandSave as You Earn PlanNo tax at grant.

Social insurance taxes apply to exercise of the SAYE options but not income tax.

Capital gains taxes paid on sale.

Employer can get a tax deduction for the cost of setting up the plan.
Applies only to listed companies and their subsidiaries.

Must be open to all employees on similar terms.

Funded by employee deferrals of salary into a bank trust that holds the fund for three to five years.

Maximum deferral 500 per month.

Maximum discount is 25% of share value at the time the employee begins participation.

Employee can choose not to exercise right to buy shares.

Early exercise available at retirement.
Approved share options plansNo tax at grant.

Capital gains taxes paid on sale.

Employer can get a tax deduction for the cost of setting up the plan.
Requirements mirror the SAYE plan, but also require that at least 70% of the shares are transferred to non-managerial employees.
Relinquished salary plans No social insurance tax on relinquished amount.

Capital gains taxes on sale.

Employer can get a tax deduction for the cost of setting up the plan.
Employee can use up to 7.5% of pre-tax salary to buy shares under a profit sharing plan trust.

Rules are the same as for approved share plans.
Buy one, get one free plansNo social insurance tax on relinquished amount.

Employee pays capital gains taxes on sale, including full value of contributed shares.

Employer can get a tax deduction for the cost of setting up the plan and the cost of contributing the shares.
Rules are the same as for approved share plans, but the employee uses after-tax dollars to buy the stock.

Stock is held in a profit sharing trust.
Employee stock ownership trustsWhen used in conjunction with an approved profit sharing scheme (APSS), company can receive tax deductions for contributions to the plan and employees are not taxed until distribution and then on a preferential basis (a portion of the distribution is not taxable). Employees pay capital gains taxes on the increase in the value of the shares from the time they were allocated. Social insurance taxes apply at distribution.

Company can deduct contributions to the plan and the costs of setting it up.

Trust must pay tax on any income it receives
Similar to U.S. ESOPs. Stock held in trust and allocated on a nondiscriminatory basis to employees who receive the shares after termination.

Almost exclusively used in conjunction with a privatization of state owned enterprises, with employees acquiring up to 15% of the stock.

A majority of trustees are typically elected by the employees.

Plans usually done in conjunction with approved profit sharing scheme (APSS).

Plans are funded by the company and can borrow money to buy shares.

When used in conjunction with APSS, company can receive tax deductions for contributions to the plan and employees are not taxed until distribution and then on a preferential basis (a portion of the distribution is not taxable). Employees pay capital gains taxes on the increase in the value of the shares from the time they were allocated.

All employees with three years or more of service must be participants. Unlike U.S. ESOPs, however, only employees who were employed at the time the plan was set up or approved can be participants.
KenyaShare purchase plansEmployee pays income tax on the discount, if any, at the purchase of a share at grant, but pays no further tax when the shares are exercised.Plans must be approved by the government, but we were unable to find documentation on rules or guidelines.
KoreaShare purchase plansEmployees can exclude up to 4 million won per year from taxable income for amounts used to buy shares.

Withdrawals made after the shares are deposited for an additional two years after the mandatory deposit period set by the ESOA expires; income tax is due on 50% of the tax deductible amount not paid when the shares were acquired. If not held for two years, full tax applies on the withdrawal of the shares.

Low or zero-interest loans are not taxable to employees.

Dividends are not taxable if the shares are held for one year.
Plan operates through an Employee Stock Ownership Association governed by a steering committee made up equally of company and employee representatives.

All employees must be eligible to join the ESOA, but senior managers are excluded.

Shares can be purchases with loans from the company at zero or below market rates.
Share contribution plansNo tax on grant of shares. Tax is levied at the value of the shares when they are withdrawn.

Dividends are not taxable if the shares are held for one year.

Contributions, interest rate reductions, and plan operating costs are deductible to the company.

Shareholders can deduct 30% of the value of contributed shares.

Companies or shareholders can contribute shares to the ESOA members
New ZealandShare purchase plansShare discount is not taxable at purchase; employee pays taxes only on sale on any gains made.Shares can be offered at any discount the employer chooses.

Shares must be held in trust for at least three years.

Employees can buy no more than NZ$1,240 per year.

Participation must be offered to all full-time employees.

When stock is sold, employers must buy the shares back at the lower of the price at the beginning or start of the holding period. That means some employees may end losing money on the purchase. Companies can "top off" the difference.
PolandPurchases of bankrupt firmsNoneEmployees can get pre-emptive rights to bid on buying bankrupt firms if at least half the employees participate in the share purchase and a liquidation auction has failed in the first round.
SlovakiaStock purchase plansNo special tax incentives are available.Companies can allow employees to buy stock issued as part of a capital increase provided shareholders approve. Discounts of up to 70% on the share price may be provided the employees buy 30% out of their own funds. Employers can make or arrange loans for employee purchases.
SloveniaStock contribution plansDistributed shares held for one year are eligible for a 70% tax exclusion and shares held for three years are not taxed, both up to a maximum of 5,000 annually.

No social insurance taxes are imposed on distributed shares.

The company can take a tax deduction for contributions to the ownership plan up to 20% of annual profit and 10% of total gross salary.
Companies (public and private) can buy up to 10% of their shares to distribute to employees annually.

Shareholders can approve part of the profit of the company being used to distribute shares to employees up to 20% of annual profit and 10% of total gross salary.

Share purchase plansDistributed shares held for one year are eligible for a 70% tax exclusion and shares held for three years are not taxed, both up to a maximum of 5,000 annually.

No social insurance taxes are imposed on distributed shares.
Employees can purchase shares with their own funds, with loans form the company, or with loans from outside lenders secured by the company.
South AfricaBlack Economic Empowerment ActContributions up to 3,000 Rand per year per worker are non-taxable to employee and deductible to employer.

Shares held for five years by employees after contribution to the plan are taxed as capital gains not ordinary income.
Companies can gain points in qualifying for Black Economic Empowerment Act government contracting incentives (important to most larger companies) by providing ownership broadly through an employee stock ownership plan. The presence of the plan is one of many ways companies can earn points. They are given credit only if they cover black employees (others may be covered, but the company does not earn credit for that).

Shares must be offered to at least 90% of all full-time employees.

Shares must be offered at no cost to employees. Companies can (and often do) use dividends to purchase the shares in a leveraged plan. Shares are held in a trust subject to vesting rules.
SpainWorker cooperatives (also called workers companies)Companies are excused from most taxes on the formation of a plan (there are a number of such taxes in Spain), but pay taxes as other companies after that.
The majority of shares must be held by the employees. Companies must retain at least 20% of profits to cover potential losses. Workers receiving unemployment benefits can choose to receive them in a lump sum to buy an ownership share.
United KingdomSave as You Earn PlanNo tax at grant.

Capital gains taxes paid on sale.

Employer can get a tax deduction for the cost of setting up the plan.
Must be open to all employees on similar terms.

Funded by employee deferrals of salary into a bank trust that holds the fund for three to five years.

Maximum deferral 250 per month.

Maximum discount is 20% of share value at the time the employee begins participation.

Employee can choose not to exercise right to buy shares.

Early exercise available at retirement.
Share Incentive PlanCompanies can deduct cost of setting up the plan.

Free or matching shares contributed to employees are tax-deductible to employer.

Employee purchases of shares can be done in pre-tax dollars.

If shares held for five years, no income or social insurance (NIC) tax due. If shares are withdrawn after less than 3 years, tax and social insurance taxes (NIC) charged on the market value of the shares at the time employee leaves the plan. If held between 3 and 5 years, both taxes are due based on the lesser of the value at grant or withdrawal.

Withdrawals due to rendundancy not taxable.

Retained or paid dividends not taxable to employee.

Gains to employee trust on shares not taxable if held for two years in tradable companies and five years in non-tradable companies.
Can take the form of free shares provided by the employee, matching shares for employee purchases, or simply employee purchase plans.

For all plans, plans must be available to all eligible employees (typically minimum service requirements) on the same terms. Plans must not have the effect of favoring more highly compensated employees.

Shares are held in trust and must not be subject to restrictions other than, most importantly, vesting period and voting rights.

For free shares, shares can be awarded by any formula open to all employees, including performance criteria. The company must require a holding period of between three and five years. No more than 3,000 year per employee may be contributed.

For matching shares, match cannot exceed two-one. Must be awarded to all employees on the same basis.

For share purchases, maximum deduction 1,500 per year or (if less) 10% of salary.
Employment rights exchangeEmployee can exclude capital gains taxes on up to 2,000 to 50,000 of shares grants (total).Employee must agree to give up basic employment rights, including redundancy and certain rights to sue.
ZimbabweIndigenization ProgramForeign companies must agree to provide a significant portion of their shares to an employee ownership trust and a community ownership trust. Specific amounts and terms are negotiated with the government.

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