ETASSUM21100 | Schedule 2 share incentive plan (SIP): General requirements: Calculating total entitlement

If a company decides to vary awards of shares by reference to level of remuneration, length of service, or hours worked, these factors must be treated separately and the separate entitlements added together to arrive at the total entitlement (paragraph 9(4)).

Example

XYZ Limited decides to make an award based on level of pay and length of service.

Salary bands of equal width are acceptable and the company selects bands of £10,000. Each £10,000 of pay gives rise, therefore, to one unit of entitlement, with each unit worth a given number of shares. Length of service entitles employees to one unit for every three complete years of service (or part thereof if less than three in total).

Adam earns £30,000 and has seven years service.

He is entitled to (£30,000/10,000) = 3 + 2 = 5 units.

Ali earns £20,000 and has two years service.

He is entitled to (£20,000/10,000) = 2 + 1 = 3 units.

These units of entitlement cannot be multiplied because the result would be disproportionate, for example, (3 x 2) = 6 and (2 x 1) = 2 units.