»Ê¹ÚÌåÓýapp

Performance allowances are awards of free shares which are made only if a performance target is met or where the number or value of shares awarded depends on performance (paragraph 34(4)). »Ê¹ÚÌåÓýapp same terms rule does not apply to awards of shares linked to performance, provided the performance measures meet the requirements of the legislation.

»Ê¹ÚÌåÓýapp SIP code sets out two ways in which a performance measure may work:

• Method 1 (paragraph 41) â€� see ETASSUM24160
• Method 2 (paragraph 42) â€� see ETASSUM24170

A Schedule 2 SIP will typically provide for both methods and the company can choose which will be used for a particular award of free shares.

A Schedule 2 SIP which provides for performance allowances must:

• make such provision for all qualifying employees in relation to a particular award (paragraph 38),
• set performance targets for performance units comprising one or more employees (paragraph 39(2)),
• use performance measures which are:

1. based on business results or other objective criteria, and
2. fair and objective measures of the performance of the units to which they apply (paragraph 39(3)), and

• require the company to notify employees of the performance targets and measures.

Some of these requirements are considered in greater detail below.

Performance Units

»Ê¹ÚÌåÓýapp performance criteria can vary between business units and can apply to the performance of:

• the whole company,
• sections, departments or units, and
• individual employees.

This enables companies to design performance allowances that meet their business needs, and that are directly relevant to groups of individuals (paragraph 42). An employee cannot be a member of more than one performance unit for the purpose of a particular award of free shares (paragraph 39(4)). If employees move between performance units during the period over which performance is measured, it is acceptable to determine their awards on a pro-rata basis according to the time spent in each unit.

Notification requirements

»Ê¹ÚÌåÓýapp Schedule 2 SIP must require the company to notify, as soon as practicable:

• each employee who has accepted an invitation to participate in an award of the performance targets and measures to be used in his or her case, and
• all qualifying employees of constituent companies of the performance targets and measures, in general terms, to be used to determine awards. »Ê¹ÚÌåÓýapp company can exclude from this notice any information that it reasonably considers would prejudice commercial confidentiality.

»Ê¹ÚÌåÓýappse requirements mean that, in practice, it is also necessary for the company to assign individuals to performance units before issuing notifications.