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Good leavers and bad leavers, how can a company treat that when they have employee share options

May 25, 2023 13:00 pm

Employee Share Option Schemes: A Comprehensive Guide for Good and Bad Leavers

In the competitive landscape of startups and growing businesses, attracting and retaining top talent is crucial for success. One effective strategy to achieve this is through Employee Share Option Schemes (ESOS). This comprehensive guide will help you understand the ins and outs of ESOS and how they can impact both good and bad leavers.

A Deeper Look at Employee Share Option Schemes (ESOS)

ESOS are designed to allow employees the opportunity to buy shares in their employing company, often at a discounted rate or even at no cost. By offering ESOS, companies aim to foster a sense of ownership and commitment among employees, thereby encouraging engagement and aligning their interests with the company's success.

The structure and terms of ESOS can vary greatly between companies. Factors such as the vesting period, exercise price, and the number of shares offered can be tailored to suit the unique needs and goals of each organisation. This flexibility allows companies to create a customised incentive plan that aligns with their growth strategy and rewards high-performing employees.

Navigating Share Options When an Employee Leaves

When an employee decides to leave a company, the fate of their share options depends on several factors, including the vesting period and whether the options have been exercised. If the options are vested (meaning the employee has met the required conditions) and have not been exercised, the employee retains the right to buy shares in the company. In contrast, if the options are not vested or have expired, they become worthless, and the employee loses the opportunity to exercise them. In this case, the options return to the company's pool, potentially to be redistributed to other employees.

Employer Approval, Tax Implications, and Legal Considerations

Although employers do not need to approve the exercise of share options (in most cases) when an employee leaves the company, there may be tax implications and legal considerations to keep in mind. Depending on the employee's tax residency, they might be required to pay taxes upon exercising their options. Additionally, capital gains tax may apply when selling the shares, depending on the share options agreement and any restrictions in place.

It's essential for employees to consult with a tax professional or legal advisor to fully understand their obligations and potential liabilities when exercising their options. This will help ensure compliance with relevant laws and regulations while minimising any unexpected financial burdens.

The Mutual Benefits of ESOS for Employees and Employers

ESOS offer several advantages for both employees and employers. For employees, ESOS provide a way to gain financial benefits from the company's success (acquisition or IPO) without directly buying shares at full price. This can be particularly attractive for those who may not have the resources to invest in company shares outright.

For employers, ESOS serve as an attractive incentive during recruitment and can help compensate employees. By offering share options with specific conditions, such as staying with the company for a set period or achieving certain milestones/KPIs, employers can motivate their staff to remain committed and focused on the company's goals.


Employee share options can be a powerful tool for attracting and retaining top talent. However, it's crucial for employees to understand the implications of their share options and how they affect their future employment. By being well-informed about their options and planning accordingly, employees can avoid potential issues and maximise the benefits of their share options. Something that OptIn is providing at every stage of their employee share option journey. You can schedule a free consultation with us to learn more about it.

Key Takeaways:

  • Thoroughly understand your employee share options and their implications before signing any agreements.
  • Consult with a tax professional or legal advisor to ensure compliance with relevant laws and regulations.
  • Plan for future employment based on current circumstances to avoid potential financial losses and maximise the benefits of your share options.
  • You can schedule a free consultation with us to learn more about it.