Employee Share Schemes and Share Incentive Plans – Good and Bad Leavers

How the removal of the DRA will affect Employee Share Schemes,

Many employees in the UK benefit from their participation in HMRC ‘approved’ schemes that provide employees and employers with tax and NIC advantages.

On leaving their employment, employees are classed as either a “Good Leaver” or a “Bad Leaver”. In general, Good Leavers – typically employees who leave employment because of ill health; death; redundancy; sale of the business; and retirement are allowed to retain some or all of the options they have been granted but which have not yet vested.

However, employees who are dismissed or resign voluntarily (although not at “fault”) are typically treated as Bad Leavers and lose their unvested options.

With the removal of the DRA (Default Retirement Age), it will be more difficult to distinguish between employees who are retiring and those who are voluntary leavers.