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Equity Participation

ESOP/PSOP for Startups

The Basics

Since startups often lack the resources to pay high salaries, they tend to offer equity participation instead in order to attract and retain talent. Equity participation can either be offered through ESOP (Employee Stock Ownership Plan) or PSOP (Phantom Stock Option Plan).

An ESOP is a program that grants employees future ownership rights in the company through shares or stock options. These plans are typically used as an incentive for future performance and to align employees’ interests with the company’s long-term success.

A PSOP offers employees a form of virtual equity. Instead of receiving actual shares, employees are promised a future cash payout based on the company’s valuation – typically triggered by events such as an exit or dividend distribution. While no real ownership is transferred, the financial benefit mirrors that of actual shares.

Learn more about ESOP and PSOP on our blog article.

Why ESOP/PSOP Can Cause Trouble For Startups

Compared to other countries, Switzerland’s legal and tax framework in regards to ESOP and PSOP is less favorable for startups. While many nations offer targeted incentives to support innovative companies and attract top talent, Switzerland still poses regulatory and fiscal hurdles that particularly disadvantage young and high-growth businesses. 

For instance, while tax rulings in Switzerland offer a way to gain clarity on employee share taxation, their cantonal nature can lead to inconsistency and legal uncertainty. This fragmented system poses challenges for young companies seeking predictable tax treatment for equity-based compensation.

Reformation Needed

Fair and Clear ESOP and PSOP Rules for Swiss Startups

We’re fighting for a more competitive and innovation-friendly environment for startups in Switzerland. To achieve this, we need simpler, more attractive frameworks for implementing employee participation programs like ESOPs and PSOPs. This can be achieved through the following measures:

  • Align with proven international best practices to attract top talent and boost innovation.
  • Promotion of clear and reliable conditions for ESOP and PSOP in Switzerland.
  • Reduce administrative barriers to implementing employee equity programs.

A thriving startup ecosystem depends on clear, consistent, and supportive policies—and we’re committed to making that a reality.

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