Taking shares I lieu of payrise(5 Posts)
I am negotiating a change of role involving taking shares instead of a payrise.
I don't have knowledge in this area. What kind of financial advisor do I need please?
What kind of shares are on offer? Do you know what kind of scheme it is?
This company produce a number of fact sheets that you might find useful www.rm2.co.uk/share-schemes/
If it's a straightforward SIP or SAYE or even EMI you might not need specialist advice but if it's anything higher risk or a large amount then a qualified IFA (or financial planner or wealth manager) might be able to help.
Things to consider would include is it a listed company - if it isn't then selling the shares off (which is how you turn them into cash that you have) can be very difficult as you effectively have to sell them privately and valuing them can also be difficult and expensive.
Would you be taking shares or options - if options then when do they mature (ie turn into shares you can actually sell) - companies tend to use options to lock in senior/valuable staff for a period of time (can be years - I used to get part of my bonus in options and the final tranche would mature 2 years after they were awarded so if you ever quite you were always walking away from a load of potential money).
Assuming it's a listed company what is the share price doing - is it holding steady/rising and is that likely to continue. Whilst shares can go down as well as up, past performance doesn't guarantee future performance etc you don't want to accept say £10k worth of shares that end up being worth only £2k when you come to sell them.
If the company isn't listed then what are the long term plans for how you would sell the shares - typically you will only get cash for them on the sale of the company to another company or at listing ('floating'). How likely are either of these things to happen - if the expectation is it's a high growth company looking to sell/float in 2 years then that might be great but if markets change then you end up with a load of shares that are worthless.
Tax on shares can be quite complicated - you probably need advice as to if it would be taxable as income (eg options as part of a bonus scheme) or capital gains. Unless you are really good at tax you may need professional advice on this.
Also don't forget that if you accept say £10k of shares in lieu of a payrise then that £10k doesn't count towards your earnings for things like pension or applying for a mortgage.
There is lots to consider with shares - don't be dazzled by headline figures like 'we'll give you shares worth £10k and options that mature in a year worth another £10k today and will probably be worth double that next year'. Work out what that means - how much will they make you in dividends, what are you not getting in pension benefit, what will you pay in tax etc. They can be a cracking deal and give you great chunks of cash at maturity etc but equally you could end up worse off than taking a smaller 'face value' pay rise.
One final thing (sorry for the epic post). Why is the company offering this - if there is a whisper that it's because they don't have the cash for payrises then be very very wary of taking shares as a company in that kind of financial position is unlikely (imo) to perform well enough to make their shares worth much at all. Bottom line, 'money' in shares is just 'paper money' until you can sell the shares and turn them into cash - think about all the press articles about how eg Bill Gates wealth fell by £x bazillion one year - he didn't really have any more or less cash at that stage it's just the value of his shares fell due to stock markets/poor company performance.
Apologies, just read my post back and it could seem quite patronising - I wrote it as if for someone who doesn't know anything much about shares/tax etc and put it in real laymans terms. Sorry if it's telling you stuff you already know. I've spent most of the last week explaining technical accounting stuff to non-accountants and am clearly still in that mode
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