A Company Share Option Plan (CSOP) is a Revenue-approved scheme that allows you to grant employees the right to buy shares in your company at a fixed price in the future, with favourable tax treatment on any gains they make.
You grant an employee an option to purchase shares at today's price (called the exercise price), which they can use after a certain period, typically three years.
If your company's value increases, they can buy the shares at the original lower price and benefit from the difference, often with significant tax advantages compared to other share schemes.
A CSOP helps you compete for top talent without using precious cash flow, aligns employee interests with company growth, and provides tax benefits that make the reward more valuable to recipients.
It's particularly useful for startups that can't match larger company salaries but can offer meaningful equity upside.
Your company must be independent (not controlled by another company), have fewer than 250 employees, and meet certain asset and trading requirements.
Employees receiving options must work for the company for at least 25 hours per week or 75% of their working time.
Each employee can hold CSOP options worth up to €127,000 (based on the market value when the options are granted).
This limit is separate from other share schemes you might operate, giving you flexibility in your overall equity compensation strategy.
When structured correctly, employees typically pay no income tax, USC, or PRSI on the difference between the exercise price and the share value at exercise.
They'll only pay Capital Gains Tax when they eventually sell the shares, which often benefits from allowances and lower rates than income tax.
A CSOP makes most sense when you're growing steadily, can forecast needing to hire key people, and want to implement a structured equity programme rather than ad-hoc arrangements.
It's worth establishing before you desperately need to hire, as proper setup takes time and requires specific documentation with Revenue approval.
