Employee Incentives 2025

Introduction

The Chambers Employee Incentives Guide contains the latest legal and tax information from around the globe for companies operating incentive arrangements.

It sets out the most common types of arrangements in a particular country and whether there are tax-favourable plans available. As well as covering the key rules and regulations that will apply when a company is offering an incentive arrangement to its employees, the guide also looks at whether there are any guidelines or codes that could also apply to a company, and shareholder and investor expectations for incentive plans.

Employee Incentives

To be profitable and drive business performance, companies need great people. Pay is fundamental to any employment relationship and will often play a material part in someone’s decision to stay in or leave a role. Companies that have an attractive pay and benefits offering should be well-placed to recruit and retain the best people.

Incentive arrangements serve as a powerful tool for recruitment, attracting top talent by offering competitive rewards that go beyond basic salary. Once employees are on board, incentives help in retaining them. When employees feel valued and rewarded for their contributions and can see a tangible link between their role and company performance, they are more likely to remain loyal to the company, reducing turnover rates and the associated costs of hiring and training new staff.

Incentives also play a significant role in motivating employees to perform at their best. By linking rewards to performance, employees are encouraged to set and achieve higher goals, which can lead to increased productivity, performance and innovation within the organisation.

Share incentives align employees’ interests with those of shareholders by tying rewards to the company’s performance. This creates a sense of shared purpose and encourages employees to work towards the organisation’s success, knowing that their efforts directly impact their own reward. By recognising and rewarding their contributions, employees feel more connected to the company’s mission and values, fostering a sense of belonging and pride in their work. This sense of community and shared success can significantly enhance job satisfaction and overall morale.

All employees, whatever their level, will be interested in their own incentive arrangements for the reasons we have explained. In addition, for senior executives, a myriad of stakeholders will have a view on the amount and structure of pay.

Remuneration has become a complex, highly regulated area in many countries, with an ever-expanding set of legal, regulatory and tax rules, corporate governance codes and shareholder requirements and expectations to consider. Advising in this area requires a combination of technical expertise, commercial judgement and pragmatism.

Global Incentives

Incentive arrangements are often offered on a global basis by companies. However, the different areas of law, regulation and tax that are relevant will usually be set at a national level. This includes laws governing the offering of shares, exchange controls, tax, employment law and regulated activities. Understanding the compliance landscape in all relevant jurisdictions will be key for any company operating its pay arrangements globally. It is also important to have a good understanding of local market practice around compliance, structure and employee and other stakeholder expectations. 

As a general point, employee share ownership is viewed as a positive aspect of the employment relationship and many countries will provide specific rules and regulations to make it more straightforward for a company to offer a share plan to employees based in that country; for example, having an exemption from the requirement to publish a prospectus when offering shares if the offer is made solely to employees of the company’s group. Whilst the rules for share incentives are often fairly liberal, this is not the case in all jurisdictions. For example, the need to control and retain currency is a priority for some countries, and there can be strict exchange controls which apply to funds moving in relation to share plans. Understanding the position country by country is key.

Global Developments

Many countries place importance on the role that incentive arrangements can play in making their jurisdiction an attractive place for companies to operate and/or for employees to work. There is significant focus on being competitive and something of a trend of easing rules and regulations to make it more straightforward to offer share incentive arrangements.

In the current economic climate, companies worldwide are increasingly using share-based compensation as a key component of a pay package. This is often instead of simply increasing the quantum of the cash elements of a pay package. Historically, share incentives were often used in sectors where companies could be cash poor but needed to incentivise employees (for example, in the growth technology sector and for start-ups). However, the market for employee share ownership is now well-developed across most sectors in many countries. 

The digitalisation of compensation management is also on the rise, with companies using technology platforms to administer and communicate incentive plans. The shift towards digital solutions enhances transparency, allowing employees to easily access and understand their incentive arrangements.

One of the key benefits of digitalisation is the improved accessibility it offers. Employees can view their incentive plans through mobile phone apps or online platforms, providing them with real-time information about their compensation.

Digital platforms can also facilitate better communication between employers and employees. By presenting information in a clear and concise manner, these platforms help demystify complex compensation structures, making them more understandable to and valued by employees.

Remaining up to date on developments in the area, whether technical or market-driven is critical, and this Guide is designed to help companies do that.