Employee benefit trusts (EBTs) can help companies of any size or structure

Employee benefit trusts are used by both public and private companies alongside other employee incentive plans to attract, motivate and retain employees. Used for remuneration and tax planning structures, these flexible discretionary trusts can be used to reward everyone in the business, or a select number of key executives.

This article summarises the key differences between companies and what to expect when utilising or initiating an EBT. We also have a guide to EBTs that goes into more detail about what an EBT is and when it’s used.

Private companies

A private company might operate one of several types of employee incentive plans. An EBT could be used in conjunction with joint ownership or fund deferral arrangements, revenue approved incentive plans, bespoke share rewards or bonus arrangements.

Benefits of an EBT for a private company include:

Nominee arrangements – The trustee holds assets for employees as a nominee. This is potentially cost and tax efficient, and ensures confidentiality around employee holdings.

Creating an internal market – The EBT buys shares from employees and recycles them to others. For private companies with no other market for their shares, this allows beneficiaries to realise the value of their rewards.

Warehousing unallocated assets – ensuring that sufficient assets are available to satisfy future obligations.

Administering bespoke arrangements – The trustee can facilitate bespoke arrangements for key hires. Trustees can also assist in exit events, restructuring, listing and lock-in arrangements.

Private equity-backed companies

Private equity-backed companies commonly operate an EBT in conjunction with a Management Incentive Plan (MIP). MIPs are designed to incentivise leadership teams and employees to maximise performance during the term of the equity investment.

Benefits of an EBT for a PE company include:

Asset holding – The trustee holds assets for employees as nominee enabling tax and cost-efficient incentive plans and ensuring confidentiality of employee holdings.

Smooth administration – The trustee is the sole legal titleholder for transactions and other events, so nothing gets missed

Equity holding – The trustee holds reserved but unallocated (or leaver) equity securely in the trust fund for future allocation.

Bespoke arrangements – The trustee can facilitate individual needs, e.g. for key hires and provides processing for those leaving or joining the MIP as well as exit, restructuring, listing and lock-in needs.  

Public limited companies (PLCs)

Many listed companies operate differing incentive plans for different reasons, and some also have legacy schemes which can be complex to manage and administer.

Benefits of an EBT for a PLC include:

Multiple plan uses – The trustee holds the assets to satisfy awards – these arrangements might include long-term incentive plans, all employee plans, Inland Revenue tax approved plans, and fund deferral arrangements.

Vested assets – The trustee might also hold these for employees as a nominee – encouraging employee share retention and easing administration and reporting (e.g., FATCA and CRS reporting).

Hedging strategies – The trustee can propose the best course of action to meet the incentive goals.

How can Ocorian help?

Our Jersey based Employee Incentives Services team has a stellar reputation and is widely regarded as a leading independent provider of trustee, administration, and system solutions for employee incentives arrangements with decades of experience between them.

Our broad client base covers all the examples above - from high profile FTSE 100, 250 and 350 companies to private companies including those backed by private equity investors and partnerships and our solutions are bespoke, so no one-size fits all.

We are always happy to discuss a company's incentives needs and to demonstrate our proposed solutions to them. Download our useful EBT guide that helps you navigate the complexity of employee benefit trusts and contact our Employee Incentives Services team today to find out more. 

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