The differrence between options & profit sharing
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Overview of options & profit sharing
There are quite a few differences and similarities between options and profit sharing. To help you make a choice, we've listed the most important points below.
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What does it mean?
Options give the right to buy shares in the future.
PARs are similar to SARs, but instead of the increase in value of a share, the employee receives a cash amount linked to the company's profit.
How does it work financially for employees?
Stock options allow employees to benefit from an increase in the company's value.
Also, employees only invest when they exercise the options, so they do not lose their investment in case of a decrease in value.
Also, employees only invest when they exercise the options, so they do not lose their investment in case of a decrease in value.
Employees receive a cash amount linked to the company's profit.
What about employee engagement?
Employees receive shares only when they exercise the options. Only then do they get voting rights.
Employees do not have a say in the company, so employee involvement is somewhat lower than with shares or share certificates.
What about tax implications for the employee?
The difference between the exercise price and the purchase price of the option is taxed as income.
The profit made by an employee is taxed as income.
What are the costs?
This is just a contract. The shares only need to be notarized when exercised.
This is just a contract.
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