An employee trust is a trust for the benefit of employees.

The employees that an employee trust benefits are usually defined by reference to employment by a particular company (or group of companies).  In addition to employees, the beneficiaries may, under the terms of the trust, include some or all of former employees (of the relevant company or group) and individuals defined by reference to their marriage to, civil partnership with or dependence on such an employee (or former employee).^[1] Charities may also be included in the class of beneficiaries.

An employee trust is typically established by the relevant employing company (or a company in the employing group) entering into a trust deed (or other trust instrument) which sets out the terms of the trust, including who is to act as its trustee. An employee trust could also be established by an individual, for example a shareholder in the relevant company, including by their Will.^[2]

The choice of who is the trustee of the trust and the type of property subject to the trust will vary depending on the purpose of the employee trust.

Many employee trusts are discretionary trusts, where the trustee has discretion to select which beneficiaries benefit, when and how.  It is possible that beneficiaries have fixed or absolute interests, for example, where shares awarded to employees under an employee share ownership plan remain held in an employee trust.^[3]

Government policy and tax rules in the United Kingdom, the United States and elsewhere encourage the use of employee trusts to support employee share ownership or employee ownership.^[4][5] Although, Government policy and tax rules may also counteract certain uses of employee trusts, for example, when they are used avoid the payment of tax on remuneration.^[6]

Employee trusts exist for many purposes and have a wide range of titles.

If the terms of the trust meet requirements prescribed by tax or other regulations, then the employee trust is likely to be known by the name given in the relevant regulations, for example, a share incentive plan or an employee stock ownership plan. If the purpose of an employee trust is to provide pensions or other retirement related benefits it is likely to be referred to as a pension plan or retirement benefits scheme, rather than an employee trust.

The term employee trust (or, in the UK, employee benefit trust) is most likely to be used to describe a trust, where the trustee has wide-ranging powers, to be used at its discretion. Such a general employee trust may, nevertheless, in practice be intended to achieve a particular purpose and be named accordingly.^[7] For example:

• a discretionary bonus trust or remuneration trust, which provides cash payments to beneficiaries;
• a staff benevolent fund, which provides sick pay or meets medical expenses;
• an educational trust, which provides funding for the education of employees' children;
• an employee share trust, which holds shares in order to facilitate employee share ownership in a company. Shares may be warehoused in an employee trust until allocated to participants under an employee share or share option plan.  Depending on the type of plan, once allocated, shares may then be held by the trustee on behalf of individual employees. In a private company, the trustee may provide a marketplace for employees to buy and sell shares acquired under a share or share option plan;^[8] and  
• an employee ownership trust,^[9] which holds shares on behalf of employees on a long term basis in order to achieve and support employee ownership of a company.

The extent to which particular types of employee trust are used in a country at any time can be significantly influenced by prevailing tax rules or other regulations, especially in relation to taxing the direct or indirect payment of remuneration, including policies on what is considered unacceptable tax avoidance.^[10]