When is a "phantom" share plan better than the real thing?

Changes to the taxation of employee share and option plans in Australia have caused many businesses to re-think the best ways to attract, retain and motivate staff. New laws effective from 1 July 2009 have created a need to review and reconsider employee share schemes. To avoid the complexity and uncertainty associated with traditional employee share and option schemes, consideration should be given to "phantom" share plans.

Traditional employee share and option schemes

The goal of employee share and option schemes is generally to align the interests of the business with the interests of employees in order to attract, retain and motivate staff. However, in a private company setting, this goal is not always best achieved with traditional employee share and option plans.