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Employee share schemes

See if an employee share scheme is right for you

Page reading time: 3 minutes

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

How an employee share scheme works

In an employee share scheme, you get shares or can buy shares in the company you work for. 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.

There are different ways of paying for shares, such as:

You may be eligible to receive shares as a performance bonus, or as remuneration instead of a higher salary.

Larger companies typically offer 'ordinary shares', which give an equity investment in the company. In a smaller company, you may get dividends only, which means you don't get other shareholder rights, such as a vote at the annual general meeting.

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. See choosing shares to buy for guidance on how to do this.

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

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

Consider your personal circumstances and financial goals. Can you afford to buy shares at this point? Or do you have other priorities like paying off your mortgage faster or contributing extra to super?

If you decide to go ahead, think about how you can diversify to spread your investment risk. What if your shares fall in value? Or the company you work for goes out of business?

If you need professional advice, talk to an accountant or financial adviser.

Pros and cons of employee share schemes



Man sitting on a chair using a laptop.

Costa buys shares in his company

Costa works for a large Australian company. Each year the company offers permanent employees an opportunity to buy up to $1,000 worth of shares. The shares can be bought at market rate with pre-tax income through a salary sacrifice arrangement.

Costa checks the terms and conditions of the share offer. It says he cannot sell any shares for a period of three years from the purchase date. If he leaves the company within that time, he has to sell the shares and may have to pay extra tax.

The company is performing well and Costa intends to stay there for the next few years. He thinks the shares will be a good investment. By buying with pre-tax income, he can buy more shares than he could with after-tax income. He decides to go ahead and accept the full share offer.