A share incentive plan (SIP) is a tax-advantaged all employee share plan under which shares are held by a trustee on behalf of an employee under the terms of a special type of employee benefit trust. All employees and executive directors must be eligible to participate in the plan provided that certain criteria are met. It is correctly called a Schedule 2 SIP and was formerly known as the all-employee share ownership plan (AESOP).

A SIP enables companies to make four different types of share award: free shares, partnership shares (paid for by employees out of pre-tax salary), matching shares (which companies can give to employees who purchase partnership shares) and dividend shares (purchased with dividends from other plan shares). There are a number of tax advantages for the employer and employee available.

For more information, see Practice note, Share incentive plans: overview.