Incentive Schemes in Denmark

There is an increasing tendency among employers to use incentive schemes and share-based remuneration as part of their employees’ remuneration, which are forms of remuneration that can be used to motivate employees and enhance employee commitment and loyalty to the employer company.

The term “incentive schemes” actually covers a broad spectrum of different schemes, including cash bonus schemes, employee share grants and purchase rights/share options, which grant the employee the right to buy shares in the company at some time in the future. 

It can also consist of a scheme where the employee receives warrants (also called subscription rights) in the company, which entitle the warrant holder to subscribe for shares in the company in connection with a capital increase at some time in the future.

Incentive schemes can be used for various purposes, e.g. as individual schemes used to recruit and retain key employees and executives as well as to encourage key employees to exert extra effort. It can also be a collective scheme for all employees to engender greater loyalty and commitment to their employer company.

Whatever their purpose, incentive schemes can be beneficial to both the employer and the employee if they are used properly.

We have prepared the publication “Incentive Schemes”, which provides an overview of the most commonly used share-based remuneration schemes (issued shares as well as share purchase and share subscription rights). Here we describe the benefits and drawbacks of the different schemes as well as the relevant rules of Danish employment law, company law and tax law, including the latest amendments made to the Danish Share Option Act and section 7 P of the Danish Tax Assessment Act concerning taxation of share-based remuneration in new, entrepreneurial companies.

We are happy to supply you with printed copies of the publication. Please send your request to Gina Ginelli.