Employee Share Ownership Plans (ESOP) in Italy

In Italy, Employee Share Ownership Plans (ESOPs), or Piani di Azionariato Diffuso (PAD), are getting more popular. This type of ownership plan is a form of remuneration offered to employees allowing them to purchase the company’s shares or, in some instances, receive them free of charge.

What are Employee Share Ownership Plans (ESOPs)?

An ESOP is a company-run, broad-based share ownership plan which enables (generally all) employees to acquire the company’s shares either free of charge, via monthly payroll deduction or via other payment methods allowed by the company.

The purpose of an ESOP is to help companies attract and incentivise highly-skilled professionals and at the same time achieve mid-to-long-term business goals. Its flexibility in design allows for various forms, including:

1. Share purchases at a given price, possibly with matching shares given by the company when certain conditions have been met
2. Share grants free of charge (via ´RSUs´)
3. Combined choices

What are the benefits of ESOPs for employers?

Attract, retain and incentivise talent

This type of share plan is likely to provide an additional financial award above and beyond base salary, and is designed to help with retention, recruitment and long-term incentivisation, ideal for smaller businesses looking to compete against large firms.

Create an employee ownership culture

It can improve team spirit – employees are not just employees, they’re employee-owners. This can have the benefit of motivating them to work harder, act like an owner and therefore make more valuable contributions.

Align with the corporate objectives

Having an ownership stake in the company can help align employees’ interests with the company’s missions and goals in the long run. For example, some companies tie their employees’ matching shares with their financial or corporate targets such as ESG performance, as a way to incentivise them to focus on those areas.

Offer flexible plan designs

ESOPs, as discussed, can come in many different forms to suit your business needs, e.g. you can offer a purchase discount or (free) matching shares which link to an employee’s length of employment or performance targets to help achieve your goals.

It’s also common for companies headquartered in Italy to extend their plans to employees in their foreign subsidiaries. This must be done in accordance with local laws and regulations, but can help to enhance the sense of belonging across the company and the employee’s participation in the growth of corporate value.

What are the benefits of ESOPs for employees?

Share the success of the company

ESOPs give employees the opportunity to receive financial benefits when the shares of the company they work for appreciate in value.

Made available to broad-based employees

This plan type is not only reserved for executives. Employees at all levels of the business can also participate in the scheme to enjoy the benefits of employee ownership.

Tax benefits to employees

Read more below

How is an ESOP taxed?

It depends on the jurisdiction that the plan is set up in. In Italy these kind of broad-based share ownership plans are subject to the Italian tax regime pursuant to article 51, subsection 2, letter g) of the Consolidated Income Tax Act, or TUIR (Testo Unico delle Imposte sui Redditi).

This means the value of the shares granted to employees is not subject to income tax when the following three conditions are met:

1. The shares must be offered to all employees;
2. The shares must have a value not exceeding €2.065,83 for each tax period; once this threshold is exceeded, only the excess is subject to taxation;
3. The shares must not be repurchased by the issuing entity or by the employer and they must be maintained by the beneficiaries for at least 3 years from the date of share allocation.

ESOP case study – Campari

Campari Group, headquartered in Italy and operating in the global spirits industry, currently employ nearly 4,000 people in 23 countries and distribute products to 190 countries.

All permanent Campari Group’s employees (except Board members) with minimum seniority of six months at Campari, or any other company in the Group, can decide to participate in their ESOP through a 1%, 3%, or 5% monthly payroll deduction. Every quarter the deductions are used to buy Campari Group shares which the company match with an additional share for every two shares (if an ESOP participant only) or four shares (if also part of the Campari LTIP) bought, if held until after a three year vesting period.

This matching element is an incentive to encourage participants to retain shares for at least three years; under the plan terms, if shares are sold earlier, participants lose the rights to the matching shares.

The high levels of take-up that Campari’s ESOP has achieved are not only attributed to the trust the employees have in the company, but also to the quality of plan design and multi-platform employee communications used.

We can help manage your ESOP

At J.P. Morgan Workplace Solutions we can offer you a comprehensive solution to administer your share ownership plan from enrolment to vesting, share tracking, reporting, assistance with compliance across all jurisdictions and employee communications.

Contact us today to learn more about our equity management software and services. All your share plan questions, requirements, and concerns can be discussed and our team will then identify how we can best meet your needs.

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JPMorgan Chase & Co., its affiliates, and employees do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal and accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transaction.