Employees Share Schemes

The following article describes the different types of employee share schemes in Kenya, their benefits, and how they work. What are employee share schemes? Employee share schemes are programs that allow employees to own a stake in the company they work for. They can take many different forms, but the basic idea is that employees are given a chance to buy shares in the company at a discounted price or are given shares for free as part of their compensation package.

The purpose of these schemes is to create a sense of ownership and commitment among employees and streamline their interests with those of the company. When employees own a stake in the company, they are most likely to perform and work harder while making decisions that are in the company's best interests, as they will directly benefit from its success. Types of employee share schemes in Kenya There are several different types of employee share schemes available in Kenya, including:

1. Employee share ownership plans (ESOPs)

ESOPs are a popular type of employee share scheme in Kenya. They allow employees to purchase shares in the company at a discounted price, either through a payroll deduction or by making a lump sum payment. The shares are then held in trust on behalf of the employees, and they can sell them back to the company or on the open market when they leave the company.

2. Share option plans (SOPs)

SOPs are another type of employee share scheme commonly used in Kenya. With an SOP, employees are given the option to buy shares in the company at a set price in the future. The price is usually set at the current market value but can also be discounted. If the share price increases over time, the employee can exercise their option and purchase the shares at the lower price and then put them up for sale in the open market at the higher price.

3. Performance share plans (PSPs) PSPs are a type of employee share scheme linked to the company's performance. Employees are awarded shares as part of their compensation package. Still, the number of shares they receive is connected to the company's performance over a certain period. If the company performs well, employees will receive more shares, but if the company performs poorly, they will receive fewer shares.

Benefits of employee share schemes Employee share schemes have several benefits for both employees and employers. For employees, the main benefits include:

1. Increased motivation and loyalty: When employees own a stake in the business, they are more likely to work harder and be more committed to its success.

2. Financial rewards: If the company performs well, employees will benefit financially from their shares through dividends or by selling them on the open market.

3. Long-term investment: Owning shares in the company encourages employees to think long-term and make decisions that will be advantageous to the company in the long run. For employers, the main benefits include:

1. Incentivizing employees: Employee share schemes are a powerful way to give employees incentives and reward employees for their hard work and commitment.

2. Attracting talent: Offering employee share schemes can help companies attract top talent, as it shows that they are committed to their employees' long-term success

. 3. Aligning interests: When employees own a stake in the company, their interests are aligned with those of the company, which can lead to better decision-making and more cohesive corporate culture. Employee share schemes are becoming increasingly popular in Kenya as a way for companies to incentivize and reward their employees while also aligning their interests with those of the company.