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Small and medium-sized enterprises (SMEs)

Employee stock options

Employee stock options can help to promote entrepreneurship

Employee stock options give employees the right to buy stock in their company at a fixed price at a time in the future. Although mainly used by big multinationals, employee stock options also offer many advantages to SMEs, especially those with high growth ambitions:

  • Stock options give the employees a stake in the development of their company and can help to create an entrepreneurial spirit within the firm by aligning the interests of employees and shareholders.
  • Stock options tie employees to their employers which is important for companies that invest in human capital.
  • Stock options enable young growth companies to compete for highly qualified personnel by offering attractive remuneration packages.

Expert Group Report on Employee Stock Options

Employee stock options are partly salary received and partly an investment made by the employee. Their hybrid nature raised numerous questions regarding the legal and administrative framework that governs them. A group of experts from EU Member States analysed national provisions for employee stock options and put forward conclusions as to how the current systems could be developed further. The report:

  • describes the pros and cons of employee stock options from the viewpoints of shareholders, employers and employees,
  • illustrates what countries can do to promote employee stock options,
  • investigates how legal and administrative rules for employee stock options can be structured,
  • addresses problems of internationally mobile employees, accounting and labour law,
  • illustrates how the current legal systems for such options could be improved,
  • gives some examples of good practice in Member States.

Final report of the expert groupPDF [400 KB] danskDeutschελληνικάespañolfrançaisitalianoNederlandsportuguêssuomisvenska

DG Enterprise Study on Employee Stock Options in the EU and the USA

The report by the expert group is partly based on a study, launched in 2001, on the benefits and risks of employee stock options, also taking into account the particular situation of small and medium enterprises.

Theoretical StudyPDF [534 KB]

In parallel a second study investigated the legal and administrative rules for employee stock options in the EU member states and in the USA.

Overview pdf - 30 KB [30 KB]

Results by country

AustriaPDF [42 KB] , BelgiumPDF [137 KB] , DenmarkPDF [58 KB] , FinlandPDF [70 KB] , FrancePDF [100 KB] , GermanyPDF [181 KB] , GreecePDF [62 KB] , IrelandPDF [99 KB] , ItalyPDF [65 KB] , LuxembourgPDF [87 KB] , The NetherlandsPDF [77 KB] , PortugalPDF [42 KB] , SpainPDF [50 KB] , SwedenPDF [148 KB] , UK [235 KB] , USAPDF [58 KB]

The studies also investigated the concrete effects that the various tax rules in the EU and the USA have for the tax payer. For all EU countries as well as for the USA effective tax rates were calculated that exemplify for certain tax payers how high the tax burden on their employee stock options (and the subsequent gains from the shares) is.

Effective tax ratesPDF [136 KB]

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