Definition & Meaning:

A 'share scheme' is a way for a company to sell or give its shares/stock directly to its employees.

There are two main types of 'share schemes':

Share Option Scheme

Share Award Scheme

With a 'share option scheme', an employee is given an option to buy shares in the company they work for at a fixed/set (and sometimes reduced) price in the future (normally after 2 years). If they join the scheme, they then have to pay for the shares/stock over a period of time (often over two years). At the end of the 'share option scheme', they have the 'option' whether to either take the shares/stock or take their money back. Normally, people take their money back if the current value of the shares/stock is below the fixed/set price they were offered when they joined the scheme.

With a 'share award scheme' an employee is given a number of free shares by the company they work at. There is a catch though. To actually receive the shares/stock, the employee has to remain at the company for a set period of time (between two to five years is common).

Normally, 'share schemes' are only offered by large companies to their employees, but they are also used by some small companies as well (especially startups).


Also Called:

Stock Options (in the US)

Related Vocabulary:

Dividend, Preferred Stock, Common Stock, Relocation Package, Severance Pay, Bull Market.

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