Employee Benefit Trusts: Unlocking Workforce Potential

This article was first published in Jersey First for Finance 2025-26 Edition 

As a long established and highly respected jurisdiction for trusts, Jersey has positioned itself as a leader in the employee incentive market through its employee benefit trusts (EBTs) offering. These structures possess several advantages for the implementation of bespoke workforce incentive schemes, providing an effective way for businesses to boost employee engagement and retention. 

Research shows that happy employees can be up to 20% more productive. When employees feel valued, supported and rewarded they are both motivated in their roles and more likely to remain loyal to the business. 

Why set up an EBT? 

There are many ways a business can foster a positive work culture and motivate its workforce. One way is to establish an EBT to align the interests of the employees with those of the company and its shareholders, helping to foster loyalty and dedication from the employees to see the company succeed in its objectives. Allowing employees to participate in an EBT should also help the company retain key employees for the long term. 

Jersey continues to be a leading jurisdiction for the location of EBTs. A well-structured Jersey EBT can help a business keep pace with change, reward the right people and provide the flexibility needed to compete in today's competitive markets. 

What is an EBT? 

An EBT is usually established in the form of a discretionary trust. Under a discretionary trust, the trustee holds and manages the trust assets for a class of beneficiaries and has a wide discretion as to who should benefit. A discretionary beneficiary has no fixed right to the trust income or capital unless a trustee discretion is exercised in their favour. 

In an EBT, the class of discretionary beneficiaries usually comprises the business' employees and this means the trustees can decide which employees receive awards, when those awards are made and in what amount, all within the framework set out under the trust and a set of rules which usually accompanies the trust. This flexibility allows the business to tailor awards to suit changing business priorities or to recognise the contributions and performance milestones of employees. 

A business can therefore decide whether the scheme should cover a specific cross-section of the workforce or whether it should instead be aimed at a more extensive employee pool. It is becoming increasingly common for companies to extend plans to a far wider section of the workforce, not just senior management, as might have been more prevalent in the past. EBT trustees often have the authority to consider − but are not strictly bound by − recommendations or guidance from the operating business regarding the exercise of their powers and discretion. 

Importantly, the EBT holds the assets separately and independently from the business. If the business runs into financial difficulty, the assets in the EBT generally remain protected and are not at risk from creditor claims. For greater protection and robustness, it is common for the business (and any group companies or other entities) to be expressly excluded from benefit under the EBT’s terms. 

When is the right time to set up an EBT? 

Every business is different but businesses will generally set up an EBT at points where effective, tax-efficient employee incentive schemes are needed. One example is following an acquisition or a merger with another company. The business might choose to use an EBT to ring-fence awards for key employees, helping retain essential personnel and providing a clear, independent vehicle to manage and deliver those benefits through what can often be a challenging period. 

How is an EBT set up? 

An EBT is typically established with a nominal sum to bring it into existence. That initial establishment is the simple part but planning how the trust will subsequently be funded is crucial. This may be achieved in a variety of ways, whether that be through further contributions, by loans to the trust from the business or by way of borrowing from a third party, which will occasionally be supported by a guarantee from the sponsoring business. 

Determining exactly who should benefit from the EBT may not be straightforward. Businesses will need to fully consider the relevant legal, tax or regulatory requirements that may be applicable. If a company operates across multiple jurisdictions, it is essential to consider whether identical EBT arrangements can be implemented in each location. Local laws and tax regulations may present obstacles to employing a uniform approach and therefore necessitate specific modifications. 

The trust documentation itself will often specify that the EBT must be operated in accordance with applicable foreign statutory regimes. Addressing these points early will help ensure the EBT is set up efficiently and avoids pitfalls later down the line. 

Why is Jersey a trusted location for an EBT? 

Jersey has long been at the forefront of the employee incentive market and there are several reasons behind this. Jersey remains a stable jurisdiction, both economically and politically. It has a robust judicial and regulatory regime alongside flexible and respected trust legislation that has long been the gold standard for other trust jurisdictions. 

It also has a highly developed fiduciary sector offering access to professional trustees and other experienced professionals in the employee incentive sector. Few other jurisdictions can offer the same level of experienced professionals capable of managing complex incentive schemes. With all of this in mind, businesses can therefore tailor the EBT to suit their unique needs. 

From a fiscal perspective, EBTs in Jersey benefit from a neutral regime. A trust is not subject to local income tax (assuming that there are no Jersey resident beneficiaries) and there are no inheritance, wealth, gift or capital gains taxes levied in Jersey. 

There is also no Jersey stamp duty, value added tax or equivalent forms of indirect taxation (though there may of course be stamp duty, or similar, payable in the business' home jurisdiction). That makes the structure especially attractive for global businesses with internationally mobile staff. 

How can Ogier help?  

Our team advises on all matters relating to the use of trusts for employee incentivisation and pensions. We act for corporates, trustees and employees around the globe who have existing schemes or want to introduce new schemes to retain and incentivise their key employees.  

Contact Richard or your usual Ogier contact to find out more.