What Are Virtual Shares?

Virtual shares, also known as Stock Appreciation Rights (SARs) or phantom shares, are an innovative way to reward employees without actually giving them company shares. They are similar to traditional stock options but with some key differences that make them increasingly popular. With virtual shares, an employee receives the value of the share increase paid out in cash, without becoming the owner of the shares themselves. This can be appealing to both employers and employees.

Why Virtual Shares Are Becoming More Popular

Virtual shares are being increasingly used because they offer flexibility. For companies, this means they do not lose control by issuing shares. For employees, there is no financial risk involved since they do not have to invest in purchasing shares. Additionally, employees can still benefit from the rising value of the company, which motivates them to work harder and stay with the company longer.

Differences with Traditional Stock Options

The main difference between virtual shares and traditional stock options is ownership. With stock options, the employee can ultimately buy shares at a low price, becoming an owner and able to vote at shareholder meetings. With virtual shares, this does not happen; the employee only receives the profit paid without owning shares. This means less administrative burden for the company.

Considering implementing virtual shares in your company? At RoundE, we have the expertise to guide you through this process. Our solutions are customized to fit your unique needs and ensure that both you and your employees can maximize the benefits. Contact us today and discover how we can help your company!

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Benefits of Virtual Shares for Employees

Virtual shares offer numerous advantages for employees. First, they create a strong sense of ownership. Employees feel more involved with the company because they directly benefit from its growth and success. This increases motivation to work harder and contribute to the company’s goals.

Additionally, virtual shares provide a financial reward without requiring employees to purchase shares directly. This means they do not need to front any money to buy shares, which can be a significant advantage. Employees receive the value of the share increase in cash or as a bonus, which can improve their financial situation without the risks associated with share ownership.

Virtual shares are also flexible and easier to understand than complex stock options. This makes it easier for employees to see and appreciate the benefits. Moreover, since employees do not own actual shares, they do not have to worry about voting rights or administrative hassles.

A downside for employees is that the tax burden from virtual shares / SAR scheme is relatively high. Since the profits from a SAR are essentially a bonus, income tax must be paid on these profits.

Benefits of Virtual Shares for Employers

Virtual shares offer many advantages to employers. One of the biggest benefits is talent retention. By granting employees virtual shares, you motivate them to stay with your company longer. This is because they participate in the company’s growth. Motivated and loyal employees are essential for any company's success.

Furthermore, there are tax benefits associated with virtual shares. Since employees do not receive actual shares but only the value increase paid in cash, you can deduct these costs from corporate tax. This means employers can save money and reinvest it in the growth of their business.

Virtual shares also provide flexibility in reward structures. For example, you can easily make adjustments to the reward system without having to issue shares. This allows you to quickly respond to changes in the market or within your company.

At RoundE, we understand how important it is to have a reward system that is both attractive and flexible. Our experts help you establish a virtual share scheme that perfectly fits your company. Want to learn more about how we can help? Contact us today and discover the benefits of virtual shares for your business!

Virtual shares are not only beneficial for employees but also very attractive for employers. By opting for virtual shares, you can retain talent, save costs, and remain flexible in your reward structure. At RoundE, we are ready to support you through every step of this process.

Differences Between Virtual Shares and Traditional Stock Options

Virtual shares and traditional stock options may sound similar, but there are some important differences that make both reward forms unique. Let’s take a look at those differences so you can decide which is best for your company.

First, there is the difference in ownership rights. With traditional stock options, you as an employee have the opportunity to buy company shares at a predetermined price. This means you become the owner of the shares and have voting rights at shareholder meetings. This does not happen with virtual shares. You receive the value of the share increase paid, but you do not become the owner of the shares themselves.

Another important difference is the tax implication. Both for options and virtual shares / SAR, the employee pays income tax on the profits they make. However, there is a significant benefit for the employer. The costs of a virtual share are deductible from the corporate tax for the employer. This is not the case with a stock option plan.

Furthermore, there is a difference in payout. With traditional stock options, you can only benefit once you exercise your options and sell shares. This can mean you need to invest money to buy the shares. With virtual shares, you receive the profit paid directly, without needing to purchase shares first. This makes it an appealing option for employees who do not want or can’t invest extra money.

Both reward systems have their own advantages and disadvantages. It is important to understand the differences well so that you can make an informed choice that meets the needs of your company and employees. At RoundE, we are happy to help you make the best decision and set up an effective reward system.

How Does Granting Virtual Shares Work?

Granting virtual shares may initially seem complicated, but the process is actually quite straightforward. When a company decides to grant virtual shares to employees, a plan is first established. This plan (contract) contains details such as how many virtual shares are given and to which employees.

An important part of this plan is establishing benchmarks and performance criteria. Benchmarks are goals or milestones the company must reach. These can range from financial targets, such as a certain revenue, to operational goals, such as completing a project. Performance criteria determine how progress toward these benchmarks is measured. If benchmarks are met, employees receive the value of their virtual shares.

Additionally, a vesting period is often established. This is a period within which employees must remain employed to earn their virtual shares. For example, a company may decide that virtual shares are only earned fully after three years. This ensures employees remain motivated to stay with the company for a longer time.

This structured approach with benchmarks, performance criteria, and vesting periods helps companies not only reach their goals but also retain their talent.

How RoundE Can Help Companies with Virtual Share Schemes

At RoundE, we understand that setting up a virtual share scheme can be complicated. That’s why we offer comprehensive support to make the process smooth and straightforward. Our approach consists of three key steps: advice, strategy development, and setting up administrative systems.

Advice: First, we provide tailored expert advice. We listen to your needs and goals and discuss the different options available. Our team of experts helps you make the best choice that perfectly fits your company and employees. This advice ensures that you have a solid foundation for a successful virtual share scheme.

Strategy Development: After advising you, we begin with strategy development. This involves drafting a plan specifically tailored to your company. We define benchmarks, performance criteria, and vesting periods so that everyone knows exactly what is expected of them. This clarity helps to increase motivation and engagement among employees.

Setting Up Administrative Systems: The final step is to set up the administrative systems necessary to manage the virtual share scheme. We ensure that everything is well-documented and set up software that makes administration easy. This means less work for you and a smooth process for employees.

At RoundE, we strive for a transparent and user-friendly process. Our goal is to allow companies and their employees to benefit from the advantages of virtual shares without it being a heavy administrative burden. We ensure that each step is clear and understandable so that everyone can focus on what really matters: the success and growth of your company.

Conclusion: Are Virtual Shares Suitable for Your Company?

Virtual shares, also known as Stock Appreciation Rights (SARs), offer an innovative way to reward employees without them owning actual shares. This makes virtual shares appealing to both companies and their employees. The main benefits are flexibility, tax advantages, and the ability to attract and retain talent without having to issue shares.

For companies, it is also important to know that virtual shares bring less administrative hassle and can provide a favorable tax structure. Additionally, they lead to a motivated team that directly benefits from the company's growth. This can result in higher productivity and employee loyalty, which is essential for sustainable success.

When determining whether virtual shares are suitable for your company, it is wise to think about your objectives and your reward strategy. Ask yourself if you are looking for ways to motivate employees without capital expenditures. Also consider the benefits of flexibility in your reward system and how this can contribute to achieving your business goals.

Want to discover how virtual shares can help your company grow and motivate your employees? Contact us today! Our experts at RoundE are here to support you so you can fully leverage the potential of virtual shares. Together, we can create a tailored reward system that fits your unique needs and goals.

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