- April 27, 2024
- Posted by: legaleseblogger
- Category: Related News
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**AI Legalese Decoder: Helping You Navigate Employee Share Purchase Schemes in New Zealand**
**Disclaimer and Background**
I have never owned shares and have no knowledge of investing. However, my employer, an American multi-national, is planning to allow its New Zealand employees to participate in its employee share purchasing scheme. This presents a unique opportunity for me to potentially benefit from this program.
**Key Details of the Employee Share Purchase Scheme**
– The program offers a 50% matching contribution of up to $3,000 per year for participating employees.
– Employees are required to pay PAYE on the share amount matched by the company.
– Immediate ownership of shares, both personally purchased and company-matched, with the ability to sell at any time without waiting or vesting periods.
– Utilization of the company’s brokerage service, Computershare, for all transactions.
– Quarterly dividends are automatically reinvested in additional shares, maximizing potential returns.
**Questions and Considerations**
As I consider joining the employee share purchase scheme, I am exploring various aspects of the program to make an informed decision. Some of the questions that come to mind include:
– Are there any drawbacks or reasons not to participate in the scheme?
– What specific inquiries should I make during the information sessions to better understand the program?
– Are there any tax implications or other considerations related to owning foreign shares that I need to be aware of?
– Will I be required to pay taxes annually on my shares, or only upon selling them?
– What are the brokerage fees associated with the program, both while employed with the company and potentially after leaving?
**AI Legalese Decoder Assistance**
The AI Legalese Decoder can provide invaluable assistance in deciphering the legal jargon and complexities surrounding employee share purchase schemes. By utilizing this tool, I can gain a better understanding of the terms and conditions of the program, ensuring that I make informed decisions regarding my participation.
**Conclusion**
In many ways, the employee share purchase scheme resembles the benefits offered by KiwiSaver matching, providing a potential opportunity for financial growth and security. Despite my limited knowledge of investing, the seemingly low risk associated with the scheme makes it an enticing prospect. I welcome any insights or advice from those with more experience in this area. Thank you for your input and guidance. Cheers!
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****** just grabbed a
Free money. Take it. If you have any worries about company share price or volatility, sell your ‘free’ shares immediately to mitigate your exposure. Working for an oil company in the 2000s, we had exactly the same deal and that’s what I did (when I remembered), sell my company matched half. Paid for a lot of holidays and I still have a goodly proportion of my original shares.
This is how Enron caused such a big loss for so many of the people that worked there because most of them had their money invested back into the company.
All I can say is make sure this is just one of your tactics in a diversified investment portfolio – the other being your kiwisaver.
Personally I would probably limit it to the $3k match so that you get the benefits of the free money, without spending a cent more, then invest anything else elsewhere.
The reason being is that if you are ever made redundant, the company wont be doing well, and the share price or dividends probably wont be doing too well either. In the Enron case, when staff were made redundant, they couldnt sell their shares because they weren’t worth anything.
This is essentially $3k a year free money (assuming that you can afford your share). Companies don’t start employee share schemes to screw over their employees, they do it to attract & retain employees.
The only cost to you will be brokerage if/when you come to sell them.
You say that you are in Kiwisaver – putting money in this is just another part of your overall portfolio. Yes, it reduces the diversification a bit, but IMO this is more than offset by the employer match. Diversification will get you an extra % or so when compared with a portfolio of similar risk. The company match is 50%.
As far as timing re potential recession etc, no-one knows what the prospects are, if the price drops, you are buying them even cheaper.
I’ve got shares in my employer. I can’t give you any specifics because I’m still learning myself but two things –
– That 33% is likely to have some sort of period before you can sell shares or leave company, it could be abused. In my case it was 25% discount but its pro-rata over next two years if I want to sell the shares.
– Do you believe the company overall has a good future? Strong / stable company? I was convinced with my employer when they invested in infrastructure that is likely to outlast me showing their long term commitment. IMO employee share purchases
– What happens to the shares when you leave the employment.
Is this WSP? Commentary in international markets they’re not doing well and this is a capital raise at the potential expense of their employees if it doesn’t deliver.
I am part of a number of company share schemes. One is a buy 3 shares get 1 share after 3 years.
I max it out every year and sell all 4 shares immediately when the share matching period vests. I then move the money into ETFs. I do the same with my share grants.
It’s worked out well for me. And after a few years most of the money is in broad based diversified assets.
Always take the free money and immediately sell it and reinvest it or pay off your mortgage. Don’t get baited into holding into. Your financial outcomes are already highly correlated to the company because you work there, no need to get even more exposure by investing there too
The key difference here is lack of diversification. If the company goes down or starts to struggle financially, there is a higher chance of you losing your job *and* your investments, however unlikely it seems at this point.
Diversification is the only free lunch in investing, so I’d make sure I’m broadly diversified before investing in any single company, with or without discount.
https://books.forbes.com/author-articles/diversification-is-the-only-free-lunch/
Yes do it! I did it with mine and was really great until it crashed
Thanks heaps for the feedback everyone!
Sounds like i should definitely participate, but maybe cash out regularly and possibly reinvest in something more diversified. Regardless, i’ve got some questions to ask at the info sessions before the scheme starts.
[https://www.ird.govt.nz/foreign-investment-funds](https://www.ird.govt.nz/foreign-investment-funds)
If you end up getting over NZ$50k worth of shares, because you have no restrictions on selling the stock, I understand that you’d be liable for FIF Tax. Something to keep in mind when it comes to diversification.