GEO INSIGHTS

A recent Sifted survey reveals that over a quarter of European startup employees see their stock options as a stepping stone to starting their own businesses, reflecting growing entrepreneurial optimism. However, about one-third are doubtful about the financial returns of their options, and many lack understanding of their true value, with over 40% unaware of their worth and nearly 45% not receiving guidance on how to exercise them. Effective communication of stock option benefits and proper scheme management are crucial for maximizing their potential as a tool for talent attraction and retention.

A new law (Law No. 7524), effective 2 August 2024, exempts from income tax the value of shares that employees of technology startups receive for free or at a discount, up to the amount of their annual gross salary. To qualify, the technology startup must be approved by the Ministry of Industry and Technology, and employers are responsible for any exempted tax if employees sell the shares within 12 years, with tax liability decreasing based on holding periods. This amendment to Article 17 of the Turkish Income Tax Code presents an opportunity for eligible companies to optimize their employee incentive programs while carefully evaluating potential implications with professional guidance.

Turkiye's new Law No. 7524, effective from August 2, 2024, exempts from income tax the benefits of share certificates given to employees by technology startups, up to the amount of the employee's gross salary. The law amends Article 17 of the Turkish Income Tax Code, providing this exemption for shares granted free of charge or at a discount, with tax collected if the employee sells the shares within 12 years, based on a sliding scale. Technology startups should evaluate how this new exemption impacts their business and seek professional guidance if needed.

Section 409A of the Internal Revenue Code governs the taxation of stock options and other deferred compensation, requiring companies to follow strict compliance standards to avoid severe tax consequences. This regulation was introduced in response to corporate scandals like Enron, aiming to enhance transparency and fairness in deferred compensation practices. For startups, compliance with Section 409A involves obtaining a 409A valuation to determine the fair market value of their stock, ensuring that employee stock options are priced appropriately and avoiding potential tax penalties and legal issues.

Rolls-Royce announced it will give each of its employees £700 worth of shares after reporting £1.1 billion in profits for the first half of 2024, as a reward for their hard work. CEO Tufan Erginbilgiç emphasized the importance of employees sharing in the company's success, with the share distribution costing Rolls-Royce £30 million. Experts highlight that share schemes can boost employee retention and engagement, though their effectiveness depends on clear communication and thoughtful implementation by HR teams.

Rolls-Royce announced it will gift 150 shares, worth approximately £730, to each of its employees as a reward for their contribution to the company's success. This move comes as the company experiences a significant financial recovery, with operating profits rising and a resumption of dividend payments after a five-year hiatus. The company's CEO, Tufan Erginbilgiç, attributed this success to a rebound in international travel, a restructuring plan, and cost-efficiency measures.

Morgan Stanley at Work has launched a new digital experience for financial benefits participants, featuring a public-facing website designed to enhance the pre-login experience. The site aims to improve accessibility and understanding of employee benefits through intuitive navigation, educational content, and support options, including a "hand raise" feature for connecting with Financial Advisors. This launch follows the completion of Morgan Stanley's back-office integration of E*TRADE and Solium, and it provides a unified entry point for participants to access a wide range of financial services, including equity compensation and retirement plans.

On July 23, 2024, Abacus Property Group issued new unquoted equity securities, including security acquisition rights, long-term incentive (LTI) rights, and short-term incentive (STI) deferral rights. These securities, totaling 9,307 security acquisition rights, 215,839 LTI rights, and 19,157 STI deferral rights, are part of an employee incentive scheme. The securities are not intended to be listed on the ASX.