Retention by design: re-engineering UK share plans for stickiness

In brief

UK share plans keep people motivated but not always in their seats. Too many designs chase performance while leaving retention under-engineered. Incentivisation moves effort; retention keeps the right people in place long enough for value to crystallise. The answer isn’t larger grants. It’s better architecture: behaviourally sound mechanics, UK-specific tax timelines and predictable governance that makes staying the obvious choice.

What we're actually solving for

One of my favourite thinkers, Morgan Housel, is correct: outcomes concentrate in a handful of tail events. In remuneration terms, that’s not just promotions or step-change products but also liquidity events - IPOs, trade sales, continuation funds, dealing windows, even refinancing moments that reset the capital structure. These are the inflection points when careers and capital both compound. 

Your plan’s purpose is to keep critical talent present and engaged through those pivotal moments. That means making staying feel rational, predictable and rewarding when the stakes are highest.

Start with the number: the “quit-cost”

For a UK mid-level executive earning a £200k base salary, annual equity awards worth 50% of salary, vesting 25/25/50 over three years with a one-year post-vest holding period, create a powerful retention mechanism. By year three, overlapping grants mean the individual carries over £300k in unvested, forfeitable equity.

Even with a flat share price, the cumulative value at risk from walking away is significant. Layer in any dividends, price growth or the prospect of being in-seat for an IPO or sale and the perceived quit-cost comfortably exceeds 1.5–2.0x base salary. From the employee’s perspective, this is compelling: a predictable cadence of awards, compounding value and a clear financial downside to leaving just before the big moments.

That design logic is not universal. In the US, equity typically vests over four years with a one-year cliff and then monthly or quarterly vesting. This creates a different rhythm of quit-cost: smaller, more frequent retention hooks rather than the larger, back-ended value at risk we see in UK plans. As more UK tech and venture-backed businesses adopt this “front-end loaded” profile, influenced by Silicon Valley norms, boards will need to decide whether to follow that cadence or preserve the UK convention of longer horizons tied to exit events. The answer will depend on many things: business maturity, sectors, tax constraints and, most of all, what best supports retention through the moments that matter.

Behaviour, not spreadsheet, first

Retention is behavioural before it’s financial. People don’t think in terms of Black-Scholes; they think in feelings of loss, immediacy, progress and ownership. Three forces explain why equity works when it does and each comes with a design lever:

Loss aversion (Kahneman/Tversky): People feel the pain of losses more than the pleasure of equivalent gains. Design for visible forfeiture: use rolling, overlapping grants that accumulate value and are clearly lost on resignation.

Goal-gradient effect (Hull): Motivation accelerates as milestones approach. Design for visibility: dashboards showing “% secured,” next vesting date and real-time cash value keep participants engaged by ensuring there is always equity close to a possible payout.  

Endowment effect (Thaler): People overvalue what they already own. Design for early ownership: a day-one equity grant makes employees psychologically “sticky” and harder to abandon than cash.

Portability and internal mobility (retention without handcuffs)

The benefit of behavioural design is that it works in the background. But it has to coexist with modern careers: portable, flexible and not felt as a trap. In complex organisations, most attrition isn’t to competitors; it’s talent leaving because the easiest way to change role, location or remit is to exit. People stay when it's easier to move inside than leave outside. That means equity has to travel with them. Three principles matter:

Continuity not resets

When people change role, group company or jurisdiction, their awards should move with them on economically neutral terms: same value, same vesting, same clock. Avoid the optics of a “reset.”

Consistency across borders

Standardise portability and leaver treatment globally where possible. Back it with clear HR playbooks on tax and withholding and consider tax equalisation to smooth friction.

Clarity for managers

Equip line managers with a one-page matrix showing how equity works across common moves (promotion, secondment, parental leave). Visible rules reduce friction and reinforce retention.

Let the UK tax clock do part of the work

(Rates as at 1 October 2025)

The UK tax code quietly does retention for you. Quit before the milestone and equity is taxed as income. Stay the course and it’s taxed as capital. That simple gap - 47% versus 24% or 14% with BADR - is one of the most powerful natural retention levers available.

Growth-aligned plans (EMI, CSOP): EMI gains qualify for capital treatment if held 24+ months, with BADR reducing CGT to 14% where conditions are met. CSOP offers similar alignment for larger or listed companies, with capital treatment if options are exercised after three years. Both create a “don’t leave yet” cliff.

Habit-forming plans (SIP, SAYE): SIP withdrawals are penalised in the first three years, partially penalised for 3–5 and are in the capital zone thereafter. SAYE hardwires a savings habit: by year 3 or 5, participants have a pot plus an option and the data shows that attrition rates reduce near maturity.

The design lever is visibility. Date-stamp the tax clocks in grant letters and dashboards, so employees know exactly what they’d give up by leaving early. Make the cliffs real and the tax code does half your retention work.

Bottom line

Incentivisation is table stakes. Retention is architecture. If you design for how people actually behave and let the UK tax clock do part of the work, you turn abstract promise into behavioural gravity, greatly improving your retention chances.

At Burges Salmon, we help clients build equity plans that retain as well as reward. From behavioural design to tax-aligned structuring and mobility enablement, we bring clarity and credibility to equity strategy.