One of the most efficient ways to motivate employees is to make them owners. In Hungary, however, plenty of legal and tax obstacles have restricted the introduction of such incentive so far. Changes made to the legal and tax environment in the recent years may yet boost the spread of employee stock programmes in the future.
The past: neither share, nor option
The most straightforward way to involve employees into the company’s ownership is to provide them with business quotas or shares directly. This raises, however, several complications. Upon the receipt of a share the employee also receives the right to participate in the decision-making procedure of the company, which is not always a desirable outcome. Furthermore, unfavourable tax consequences may come up: the unpaid part of the fair market value of the share is taxed at the same way as if salary was paid to the employee. This makes such type of incentive rather unattractive.