Share-based incentives in Poland: benefits and key considerations

In today’s competitive job market employers are increasingly implementing additional benefits to attract and retain key employees. Among these, incentive schemes that grant employees company shares have gained significant traction. These programmes not only boost employees’ engagement and satisfaction but also align their interests with the company’s success and increase.

Understanding share-based incentive schemes
Generally speaking, share-based incentive schemes involve offering employees the opportunity to acquire shares in the company they work for or its affiliated entities. In Poland this can be achieved through various instruments, including share options, subscription warrants, or direct share awards. Such schemes serve as powerful tools to foster a sense of ownership among employees, motivating them to contribute actively to the company’s growth and profitability.

Benefits for employers and employees
For employees, participating in share-based incentive programmes provides a tangible stake in the company’s future. As the company’s value increases, so does the potential financial gain for the employee, either through the appreciation of share value or dividend distributions. This opportunity can be particularly appealing to high-performing individuals, encouraging them to remain with the company long-term.

Employers, on the other hand, benefit from enhanced employee loyalty and performance. By aligning employee interests with company objectives, these schemes can lead to improved productivity and a stronger commitment to organisational goals. Additionally, offering share-based incentives can be a strategic advantage in recruiting top talent, especially in competitive industries.

Key considerations in designing incentive schemes
When implementing incentive scheme, several factors must be carefully considered:

Eligibility Criteria: Determining which employees qualify for the scheme is crucial.
Key Performance Indicators: Linking share awards to individual or company performance metrics can further incentivise employees to meet or exceed targets.
Vesting Period: Establishing a vesting schedule ensures that employees earn their shares over time, promoting long-term commitment.
Tax Implications: Understanding the tax consequences for both the company and employees is essential. In Poland, the Personal Income Tax (PIT) Act provides specific regulations for taxation of income derived from participation in employee incentive plans. Depending on the structure of the scheme, income may be taxed at a flat rate of 19% for capital gains or at progressive rates up to 32%. The classification also affects social security and health insurance contributions.

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#MORE in an article by Agnieszka Telakowska-Harasiewicz in Contact magazine >>
https://bpcc.org.pl/pl/share-based-incentives-in-poland-benefits-and-key-considerations/.