Employee plan trends

Long Term Incentive Plans (LTI)

• Structure: 2 or more performance conditions that are tested over a 3–5-year period.
• Participants: Key management personnel.
• Vesting conditions: Market-based performance conditions. Relative TSR remains the most popular, followed by EPS and CAGR. Some companies are also incorporating non-financial hurdles such as reputation, customer satisfaction, environmental and sustainability.
• Restrictions: Some companies have introduced further restriction of a 1-year trading lock on shares upon vesting and have clawback provisions in their plan rules.
• Emerging trend: While 3 years’ performance measurement is the most common, the 4 years’ performance period is gaining momentum especially in the finance and banking sectors.
• Type of instrument: Share rights, nil price, and exercise cost options.

Short Term Incentive Plans (STI)

• Structure: Allocation of awards, based on look back internal measure with vesting of awards occurring over a 1–3-year period.
• Participants: Key management personnel and Senior management team.
• Vesting conditions: As the award is based on past performance, vesting is time based with employment at the time of vesting as the key criteria.
• Restrictions: These awards don’t have any additional restriction period after vesting.
• Emerging trend: Most companies are staggering the vesting of the STI awards to ensure performance measures are achieved as part of the STI milestone is sustained. There is an even split between companies offering shares or rights with a small number of companies offering options as well. 
• Type of instrument: Shares, share rights and nil price options.

Salary Sacrifice contribution plans

Key Observations

• Structure: The ability to purchase shares that provide participants with certain tax benefits.
• Participants: All employees.
• Vesting conditions: Time based with employees having the ability to elect a tax deferral period of up to 15 years.
• Restrictions: Employees can make an election and defer the release of shares.
• Emerging trends: Share match plans are gaining popularity with employees being able salary sacrifice post tax and company matching these by certain ratio. Monthly share purchase remains popular followed by quarterly share purchase. Participation rates in salary sacrifice plans is trending upwards.
• Type of instrument: Shares

Tax exempt gift Share plans

• Structure: 3-year restriction, offer of shares to at least 75% of the employees.
• Participants: Broad-based employees
• Vesting conditions: Time based
• Restrictions: No further restrictions.
• Emerging trends: The tax exempt plan is still one of the most popular broad-based plans with over 20% of the companies implementing a gift share plan.
• Type of instrument: Shares