Stock options: a plan for company growth and talent retention in Spain

If you have a question about this topic, please Contact Us

7 lawyers Online Now

The retention of talent in the company has become one of the greatest challenges for those who are responsible for preventing their most talented employees from succumbing to the temptation of migrating to the competition. That is why we have gathered valuable information about Stock Options, an invaluable alternative in terms of giving your employees plenty of reasons to continue belonging to your organization, as well as in the field of tax benefits.

Stock Options as allies to retain your talented collaborators

Through the Stock Options method, your collaborators become shareholders of your company, which represents an unparalleled incentive, and not only for them to continue belonging to the organization, but also for them to take productivity to levels hitherto unknown, both for you as for themselves.

The mechanism is based on giving your collaborators, who would become the beneficiaries, a certain number of shares of your company. These shares would maintain a certain fixed price for a period of time that ranges between three and five years. Once this period has expired, your employees will have the right to acquire the shares at the price that has been stipulated at the beginning of the arrangement.

What happens if the market value of the shares has increased?

The possibility that, during the period of time in which your collaborators have had the shares in their possession, the price has risen, is precisely one of the great attractions of the Stock Options method.

This is because, if that were the case, your collaborators will have the possibility to sell them to receive the corresponding benefits.

What happens if the market value of the shares decreases?

Again, your collaborators will also benefit from this assumption, since they will have the right to reject their purchase. Therefore, there is no way for them to lose if they are inside the Stock Options system.

What are the Stock Options implementation modalities?

There are two ways in which the company can implement the Stock Options system:

  • Direct delivery
  • Delivery of option rights

In either of these two ways, a collaborator will become a partner of the company, and this condition could be decisive when it comes time to have to choose to stay in the company or accept an attractive proposal from another company.

On the other hand, through any of these mechanisms, the collaborator, now a partner, begins to receive remuneration in the form of dividends, which become an extra income to be received, since it is added to his salary.

Tax benefits of the Stock Options system

Delivering Stock Options to workers is an activity that is exempt from income tax for them, which applies both when they are delivered for free or sold at a price lower than that indicated by the market.

The possibility is contemplated that the shares to be delivered to the collaborators are of companies belonging to the group of companies.

The conditions to benefit from the personal income tax exemption are:

  • Twelve thousand euros per year is the maximum exemption limit for each collaborator.
  • All workers must be included in the Stock Options plan, except those who, for reasons of seniority, it is decided to leave out of the plan.
  • The offer to be made must have the same conditions for all collaborators, both from the organization and from its groups or subgroups.
  • Five percent is the limit of the share of the company that each worker can have. This condition also applies to their spouses and relatives up to the second degree.
  • The minimum time to hold titles is three years.

From twelve thousand euros per year, the worker must pay the difference between what he has paid for the shares acquired and their market value.

The other benefit available consists of a thirty percent reduction in the full yield, but to obtain it, you cannot exceed three hundred thousand euros.

What benefits does the Stock Options method have for the company?

In addition to favoring the retention of talent, the Stock Options method is ideal in the following cases:

Emerging companies: due to the limitations that new companies present in terms of the possibility of offering attractive salaries, Stock Options are presented as something that goes beyond the mere quality of compensatory incentive.

Increases motivation: it is proven that workers who perform their duties under the influence of motivation are more willing to collaborate, to work as a team, to give more than what is circumscribed in the description of their duties, to work longer extra and to give up his ego to work as a team. Obtaining just one of these benefits is in itself a daunting task for any organization. On the other hand, thanks to the Stock Options, all of them can be obtained, and spontaneously by the collaborators.

Avoid employee turnover: when employees leave the organization, the cost is much higher than what can be seen at first glance, because it is necessary to invest time in their training and education. However, Stock Options have been able to put an end to this endless carousel of workers coming in and out due to lack of incentives to stay.

If you consider that Stock Options are a profitable and beneficial alternative for your organization, contact us so that we can draw up a plan for you in accordance with current regulations.

Information search

If you have a friend or know someone who may be interested in this topic, you can share or send this text using these buttons:

Need more info? We are here to help