Have you ever given a thought to what motivates you the most to work in a startup? The dynamic environment, friendly colleagues, and skyrocketing growth of the company could be a few of the positive factors. But what if we told you, that you could own shares of the company you work in? Apparently, employee share options are the new worldwide trend for startups that might just be the thing you need.
Employee share options are a common form of reward for employees with increasing popularity among startups. Employee share options allow the company's employees to acquire the right to purchase shares and use it after a certain period of time that results in the ownership of shares. Let’s say it’s like a long-term relationship between employee and the company, as the share options have the potential to pay off, especially if you join the company in the early stages of its development.
But what’s in for startups? Employee share option plan is a win-win option for both – employees and startup itself. Employees are given the chance to acquire startup’s share rights by exercising shares options, and that’s attractive for more qualified employees. It also motivates them to use a long-term approach to raise the value of the company – the successful the company, the bigger the shares. For the startup, on the other hand, share options are a tool for attracting highly skilled workforce in the early stage of startup’s development, when the company can’t afford to pay big salaries. That’s also a way to show loyalty and appreciation of employees’ performance.
The practice of allowing employees to acquire share options in the company they work for gained its popularity due to legislative changes to Latvia’s shares options policy. Some of the recent improvements include applicable tax-free regulation to limited liability companies, reduced mandatory cliff period from 36 months to 12 months, as well as substantial amendments in Commercial law allowing limited liability companies to issue different category shares. These reforms have turned Latvia into the most startup-friendly country in Europe.
Uldis Tēraudkalns, the CEO of NexPay, strongly believes, that a motivated team is the basis of a fast-growing company, so NextPay offered its share options in holding company for its employees even before the last amendments of share policy in Latvia. “From the company’s point of view, it feels amazing, that we can motivate our employees in the long run with a possibility to acquire shares without tax consequences for entrepreneurs".
Similar thoughts on the employee stock options share Artis Kehris from Printify, who highlights the support of the State Revenue Service (SRS) in Latvia. “Printify has been offering share options for its employees for the past three years. We’re happy about the recent amendments, which now allow employees to acquire share options right after the first 12 months of work in the company. I’ve heard that many startups are afraid to use this amazing tool due to complicity of reports for SRS, but it’s quite the opposite – SRS is very forthcoming and helpful in this matter!”
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