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Phantom share schemes are employee bonus arrangements where the calculation of the reward is typically aligned with the growth in value of the business over the performance period being measured.

Whilst not technically a share scheme, these are often designed and implemented by the same employee incentives advisors who devise share schemes. In addition, employers may use phantom schemes where an actual share scheme would not otherwise meet their incentive requirements, or for individuals who do not qualify for the company’s actual share schemes. They should therefore be considered as part of an overall project to decide on the best ways of incentivising employees based on company share performance.

It is also worth noting that phantom share schemes must be considered for accounting purposes as a share-based payment under IFRS2 or FRS 102. See ICAEW IFRS2 and Financial Reporting Council FRS 102.