What Is an Employee Benefits Trust (EBT)? Definition & How It Works

Growing companies face constant pressure to keep their best people invested in their long-term success. And equity plays a significant role in that effort. Deel and Carta's 2025 State of Global Compensation Report found that median equity grants for engineers, as a share of company ownership, grew consistently between 2021 and 2025, with particularly strong acceleration in Brazil and India. Deel's Global Head of Rewards, Jessica Pillow, points to equity as a way to "improve retention without overextending fixed payroll costs."

Employee benefit trusts are an interesting option, particularly for finance and people leaders weighing how to structure compensation across borders. This guide explores what an employee benefits trust is, how it works, its tax advantages, and where it fits into a broader global compensation strategy.

What is an employee benefits trust?

An employee benefits trust (EBT) is a legal structure that holds company shares on behalf of employees, allowing them to build ownership without receiving shares directly or immediately. A trustee, often independent of the company, manages the shares and controls how the value of the equity passes to participants over time.

Employers set up EBTs primarily in the UK, Ireland, and Australia, where the structure carries specific tax treatment under local trust and employment laws.

How do employee benefits trusts work?

The mechanics of an EBT are based on how the trust acquires and holds shares, and what participants receive once their shares are allocated.

Who holds the shares?

The trust, not the company or the employee, legally owns the shares once they enter the EBT structure. A trustee, often a professional trust provider or law firm, administers the trust independently and manages the shares according to rules set out in the official trust deed.

How is the trust funded?

Companies typically fund the trust by issuing new shares directly into the trust, or purchasing existing shares from either the market or departing shareholders. Either method builds a pool of shares the trustee can hold and allocate at their discretion over time, rather than distributing everything to employees all in one hit.

What do participants receive?

Employees don't own shares outright the moment they join an EBT-linked scheme. Instead, the trustee allocates shares to individual participants based on criteria the company sets, such as tenure, performance, or seniority.

Dividends often form the first source of value once shares are allocated. These are paid out to participants while the trustee still holds the underlying shares. Share price appreciation adds a second layer, since the value participants eventually receive reflects how the company has grown since allocation. Vesting conditions determine when participants receive the underlying shares directly. At this point, the trustee's role in holding those specific shares ends.

What are the tax advantages of EBTs?

Tax treatment is one of the main reasons that companies might choose an EBT structure over issuing shares directly. Benefits apply differently depending on whether you're looking at the employer's side or the employee's side. But both contribute to why EBTs remain popular in the jurisdictions where they operate.

Tax benefits for employees

Employees typically face reduced or deferred tax liability compared to receiving shares outright. Rather than paying income tax on the full value of shares at the point of grant, participants often defer that liability until shares vest or transfer out of the trust, spreading the tax impact over time.

Dividends paid through the trust can also carry favorable tax rates compared to standard income, depending on the specific scheme and jurisdiction involved. This treatment gives employees a reason to stay invested in the company's long-term performance rather than treating equity as a one-time windfall.

Tax benefits for employers

Companies funding an EBT can often claim a deduction for contributions made into the trust, reducing corporate tax liability in the year the contribution occurs. This treatment depends heavily on how the trust is structured and which jurisdiction's rules apply.

EBTs also give employers a tool for managing dilution. Funding the trust with existing shares, rather than issuing new ones, avoids diluting current shareholders every time the company makes a new allocation to employees.

How do EBTs vary by country?

EBT availability depends on whether a country's legal system recognizes trust structures for holding employee shares. The UK, Ireland, and Australia have established EBT frameworks, each with its own tax rules and trustee requirements.

Companies outside these markets rely on different structures to grant stock options to employees. In the US, for example, employee stock purchase plans (ESPPs) let employees buy shares at a discount through payroll deductions, without involving a trust. Participants own their shares directly and immediately, rather than through a trustee who allocates value over time.

Other countries lean on direct share grants, phantom equity, or cash-settled plans determined by local tax and legal systems. But it’s worth knowing that none of these work as a direct EBT equivalent, since the trust mechanism doesn't translate cleanly across borders.

Is an employee benefits trust right for your team?

EBTs suit a specific set of circumstances rather than every growing company. Here’s an easy way to tell if an EBT fits or when a different equity structure makes more sense.

For companies that check most boxes in the first column, it’s worth having a conversation with an equity or trust specialist. Teams outside EBT-recognized jurisdictions, or without an established equity program yet, likely need a different structure entirely, such as the ESPP or additional types of direct grant models.

How Deel supports global compensation and equity data

Although an EBT operates independently of payroll and compensation systems, they’re all closely intertwined. Trust distributions, dividend payments, and vested share values often need to appear in an employee's total compensation picture, even when a separate trustee manages the shares.

Deel is a global HR and payroll platform that helps companies manage compensation, benefits, and workforce data across countries. For teams running an EBT, Deel keeps compensation and payroll systems connected to the outcomes an EBT produces, without touching the trust itself.

Compensation data

Deel HR centralizes worker records, roles, and compensation data across a company's global workforce. The data gives finance and people teams a single reference point for how EBT participation belongs to someone's total package.

Payroll

Deel Payroll processes pay across a company's workforce, handling tax and compliance in each location. Where trust-related payments need to reach an employee through payroll, existing infrastructure removes friction a company would otherwise face.

Note: Trustees, equity law firms, and trust specialists handle the legal structure, allocation rules, and jurisdiction-specific compliance an EBT requires. Deel keeps compensation and payroll data connected, but it doesn't manage the trust.

Ready to build a competitive, compliant compensation package that works across borders? Deel’s Compensation and Deel HR help you manage equity strategy alongside tools like EBTs, keeping your global compensation picture consistent wherever your team is based. Book a demo to see how Deel can support your global compensation strategy.