Phantom Share Schemes

For growing organisations, attracting and retaining top talent is more important than ever. While traditional equity schemes can motivate employees, they also come with dilution, legal complexity, and administrative burden. This is where Phantom Share Schemes come into their own. They offer many of the same motivational and financial benefits as share ownership, without the complications that accompany issuing real equity. At Indigo Reward, we specialise in designing Phantom Share Schemes that align seamlessly with your commercial goals, reward strategy, and company culture.

What Are Phantom Share Schemes?

Phantom Share Schemes are incentive arrangements that mirror the value of real shares, but without transferring any actual equity. Participants are allocated “phantom” shares that track the company’s value. When a specified event occurs, such as a sale, exit, or predetermined vesting date, employees receive a cash payment representing the increase in the value of those phantom shares.

This gives employees a stake in the company’s success, driving engagement and performance, while allowing employers to maintain full control of their equity structure.

Why Companies Choose Phantom Share Schemes

Businesses across sectors are increasingly turning to Phantom Share Schemes because they offer flexibility, clarity, and commercial efficiency. Organisations often choose this route for several reasons:

No Dilution of Ownership

One of the standout advantages is that no equity changes hands. Founders and shareholders retain full ownership, avoiding the dilution that comes with traditional share options.

Simple to Administer

Phantom Share Schemes bypass the extensive legal and regulatory requirements surrounding the creation and issue of shares. This means a more streamlined setup and ongoing administration.

Strong Alignment With Performance

Because employee pay-outs are tied directly to company value growth, participants are genuinely invested in helping the business thrive. This reinforces a high-performance culture.

Clear and Predictable Exit Events

Whether linked to EBITDA growth, a sale, or internal valuation milestones, Phantom Share Schemes offer clearly defined triggers. This makes it easy for employees to understand what they are working toward and how rewards are calculated.

Attractive to Employees

Employees benefit from the financial upside of equity-style rewards without needing to purchase shares or navigate the risks associated with real ownership.

How a Phantom Share Scheme Works in Practice

Although every scheme is tailored to organisational needs, most follow a similar structure:

1. Allocation of Phantom Shares - Participants receive a set number of phantom shares, mirroring actual equity allocations.

   
   

2. Performance or Time-Based Vesting - Shares may vest over time or upon meeting performance targets, reinforcing longer-term engagement.

   
   

3. Valuation Tracking - The phantom shares track company value, which can be based on formulaic valuations, independent valuations, or transactional value.

   
   

4. Payment Event - When a specified event occurs, participants receive a cash payment equivalent to the value growth of their phantom shares.

   
   

With careful design, Phantom Share Schemes can be fair, motivating, and cost-effective, making them a powerful tool for scaling businesses.

Why Work with Indigo Reward?

At Indigo Reward, we bring clarity and expertise to every stage of incentive design. Phantom Share Schemes can be highly effective, but only when tailored correctly to reflect company strategy, growth trajectory, and commercial realities. Our role is to make this process seamless.

Expert Scheme Design

We work closely with leadership teams to understand organisational goals before designing a Phantom Share Scheme that fits. Every feature from vesting conditions to valuation methodology is shaped around your specific needs.

Fair and Commercially Sensible Structures

Our schemes are created to drive performance while protecting the financial interests of the business. We ensure a balance between rewarding employees and maintaining manageable costs for employers.

Clear Communication Materials

Engagement is critical. Indigo Reward prepares clear documentation and communication materials so employees understand exactly how the scheme works and what they stand to gain.

Ongoing Support

From implementation to adjustments over time, we provide continued guidance. As your business evolves, your incentive arrangements can evolve with it.

Is a Phantom Share Scheme Right for Your Business?

Phantom Share Schemes are particularly suitable for businesses that want the motivational power of equity without the complexities of issuing real shares. They are ideal for:

• Growing companies aiming to retain key talent

• Organisations preparing for future investment or sale

• Businesses with global teams that need a consistent and easily administered reward model

• Founders keen to protect shareholding while still offering compelling incentive packages

If you want a powerful, flexible reward structure that aligns employees with long-term success, a Phantom Share Scheme may be the perfect solution.

Talk to Indigo Reward

At Indigo Reward, we help organisations create incentive arrangements that inspire loyalty, drive performance, and support sustainable growth. If you are considering the introduction of a Phantom Share Scheme or want to refine an existing arrangement, our team is ready to guide you through every step.