Employee share schemes

If you're invited to join an employee share scheme, you may be able to buy shares at a discount on the current market rate. 

What is a share

A share is part ownership in a company. Companies issue shares to raise money. After that, investors can buy and sell those shares to and from each other.

When you own shares, you own a small part of the company. Learn more about what shares are and how to choose them.

How an employee share scheme works

An employee share scheme lets you receive or buy shares in the company you work for, often at a discount. This is also known as an employee share purchase plan, share options or equity scheme.

Companies use share schemes to attract, retain and motivate employees. They also align employee interests with those of shareholders.

You may be able to pay for the shares through:

• salary sacrifice - using part of your pre-tax income
• regular payments - paying the cost over a set period
• dividends - using dividends from shares you already hold 
• a loan from your employer
• upfront payment

Some companies offer shares as part of your performance bonus, or instead of a higher salary.

Employee share schemes vary, so check the offer terms and consider the pros and cons before you sign up.

What to check before you sign up

Research the company to see how well it's doing and whether the shares are likely to increase in value. Consider whether buying shares fits your financial goals.

Each share scheme is different, so look at the terms and conditions of the offer. Check:

• when you can buy or sell the shares
• whether you'll receive dividend payments
• what happens to your shares if you leave the company
• any tax benefits and obligations (see employee share schemes on the Australian Taxation Office website)

Ask questions if there's anything you're unsure about.

If you need professional advice, consider talking to an accountant or registered financial adviser, if you have one.

Pros and cons of employee share schemes

Pros

check_box You benefit if the company performs well.

check_box It could motivate you to stay longer with the company.

check_box You may be able to buy shares at a discount to current market price.

check_box You may not have to pay a brokerage fee when you buy or sell shares.

check_box You might receive tax benefits.

Cons

check_box_outline_blank Your share package could come with restrictions. For example, you may have to meet performance targets, or stay with the company for a certain number of years.

check_box_outline_blank If you're paying for a share package over time, you might have to pay it off before you can sell the shares.

check_box_outline_blank You may have to give back or sell your shares when you leave the company.

check_box_outline_blank You could lose money if your shares go down in value.

Learn more about choosing shares to buy and keeping track of your investments.