GEO INSIGHTS

From 1 April 2026, New Zealand’s new Employee Deferred Shares (EDS) regime allows unlisted companies to defer taxation on employee share schemes until a real “liquidity event” occurs, helping reduce the “tax-without-cash” problem where employees are taxed before they can sell shares. The final rules refine earlier proposals by excluding dividends and illiquid restructures from triggering tax, while requiring employers to designate shares as EDS and notify both employees and Inland Revenue within 20 days. While the regime improves alignment between tax timing and actual liquidity, it still involves trade-offs, as employees may ultimately be taxed on higher future share values when they are finally able to sell.

Blue Origin, Jeff Bezos’ space company, has introduced a new employee stock incentive plan aimed at addressing worker dissatisfaction and improving morale, especially as competitors like SpaceX offer more lucrative equity outcomes. The changes follow employee complaints about earlier stock option programs that often failed to pay out unless an IPO or company sale occurred, leaving many options effectively worthless. The revised plan expands payout triggers, such as external funding rounds and tender offers, and is intended to make compensation more competitive while retaining talent amid intense rivalry in the space industry.

At Budget 2025, the UK government announced major expansions to the Enterprise Management Incentives (EMI) scheme from 6 April 2026, increasing the employee limit to 500, gross assets to £120m, and the company-wide option limit to £6m, making EMI available to more scale-ups. The maximum EMI option exercise period is extended from 10 to 15 years, with the change intended to apply retrospectively to existing options, and EMI/CSOP rules will also allow PISCES platform sales as a valid exercise event. These updates, along with earlier implementation timelines starting from 2025 for PISCES-related changes, aim to improve liquidity options and broaden access to tax-advantaged employee equity schemes.

UK employee share schemes are a key tool for attracting and retaining talent, especially in scale-ups, with four main HMRC tax-advantaged options: EMI, CSOP, SAYE, and SIP. From April 2026, EMI is significantly expanded, increasing company size limits, asset thresholds, employee caps, and option lifetimes, making it accessible to many more businesses and still offering the most generous tax treatment (capital gains rather than income tax). Each scheme serves different needs—from EMI for scale-ups, CSOP for larger or ineligible firms, SAYE and SIP for all-employee participation—while non-tax-advantaged options like growth shares are used when HMRC schemes don’t fit but require more careful tax structuring.

This HMRC helpsheet explains how employee share schemes and share options are treated for Capital Gains Tax, covering approved schemes (like SIP, SAYE, CSOP, EMI) and unapproved arrangements. In general, your CGT cost is what you paid for the shares plus any amount already taxed as employment income, with special rules for different schemes (for example, SIP shares can be CGT-free if held correctly, and EMI options get favourable treatment including from grant date for relief purposes). It also sets out administrative rules such as reporting requirements, elections (like same-day share acquisition elections), transfers to ISAs or pensions, and reliefs for certain disposals, all of which affect how and when tax is calculated on employee-related shares.

As competition for talent increases, more companies are turning to Employee Stock Ownership Plans (ESOPs) to improve retention, strengthen culture, and give employees a financial stake in the business. ESOPs allow employees to gradually accumulate company shares through tax-advantaged retirement structures, with growing adoption across the U.S. as a tool for succession planning and workforce engagement. While they require careful structuring, business leaders see employee ownership as a long-term strategy that aligns company success with employee wealth-building and loyalty.

The ESOP Impact Study evaluates Employee Share Ownership Plans (ESOPs) used in merger conditions to increase worker ownership and assess whether these schemes deliver meaningful benefits to employees. It finds that ESOPs are widely supported for improving employee participation, motivation, and financial inclusion, but their effectiveness depends heavily on scheme design and implementation quality. Key concerns include debt-heavy funding structures, limited employee understanding of how ESOPs work, and weak governance or trustee capability, all of which can reduce the real benefits to workers if not properly addressed.

AI adoption in compensation and total rewards has moved beyond experimentation, with most professionals already using AI tools, but few organizations have developed the strategic infrastructure needed to fully realize their value. Companies progress through stages of AI maturity—from basic experimentation to advanced integration—depending on the strength of their data quality, governance, cross-functional alignment, and ability to measure impact. Organizations that build strong AI foundations can improve efficiency and decision-making, while those with immature adoption risk compliance issues, bias, low trust, and unreliable compensation outcomes.

Employee Stock Ownership Plans (ESOPs) are governed by the strict fiduciary rules of Employee Retirement Income Security Act, which prohibit plan assets from being used to indemnify sellers, trustees, officers, or other parties because doing so would violate the exclusive benefit rule and participants’ retirement interests. Indemnification would also create prohibited transactions and fiduciary breaches, exposing trustees and other parties to significant legal and financial penalties. Instead, ESOP transactions use alternative risk-allocation tools such as company indemnities, representation and warranty insurance, seller-funded escrows, and purchase price adjustments to remain compliant while protecting employee benefits.