An employee stock option is the right given to you by your employer to buy (“exercise”) a certain number of shares of company stock at a pre-set price (the “grant,” “strike” or “exercise” price) over a certain period of time (the “exercise period”). Most stock options have an exercise period of 10 years.
Why do companies offer share options?
Stock options are a benefit often associated with startup companies, which may issue them in order to reward early employees when and if the company goes public. They are awarded by some fast-growing companies as an incentive for employees to work towards growing the value of the company’s shares.
When can I sell share options?
It’s only when your company floats on, say, AIM in the UK, that people can publicly sell their shares on the open market to anyone who wants to buy them. If your company is likely (or you want to) remain in private hands, your staff will only be able to sell their shares to you (the owner) or the company.
Do you have to have share option to get Saye?
SAYE works in tandem with share options which are granted by the company. The scheme is not discretionary; it must be offered to all eligible employees and company directors. Under the scheme, employees can save up to £500 per month as part of a ‘savings contract’ which lasts for either 3 or 5 years.
How are share options used in a company?
Share options granted by a company give the holder the right to buy shares from that company at some date in the future. Companies will often grant options to employees as part of their overall remuneration package as a way to motivate them and align their interests with those of the company’s shareholders.
Do you pay income tax on share options?
A Company Share Option Plan (CSOP) allows companies to grant share options to employees and directors worth up to £30,000 each. There is no income tax or NI payable on the difference in the market value of the shares when they are purchased and the exercise price, although CGT may need to be paid if the shares are later sold.
Who is entitled to exercise a share option?
The right to exercise the share option always resides with the option holder. This is the case for both call options and put options. For call options, it is likely that the company and existing shareholders will need to provide additional approvals before a prospective member enters into a share option arrangement.
