How share options work13 Oct 2023 09:08
Set up employee share schemes
Defining share-option and share-award schemes
Guide
Share-option schemes
Share-option schemes are typically used as an incentive for employees.
A share option is the right to buy a certain number of shares at a fixed price, some period of time in the future, within a company.
Employees can generally exercise their share options - ie buy the shares - after a specified period, known as the vesting period. You can make the granting and exercising of share options dependent on reaching certain targets, such as specific sales targets.
When an employee exercises their share options, it's at the price fixed at the date of grant, ie when the options were given to the employee, regardless of the prevailing market price. They can then keep the shares or, if the market price is higher, sell them at a profit.