2 June 2026
Attracting and retaining the right people is one of the central challenges for any growth company. Salary alone is rarely enough. For many businesses in an early stage, incentive programs are an important part of the solution: they can strengthen alignment, support retention, and give key individuals a genuine stake in the company’s long-term success.
But choosing the right model is not always straightforward. Different structures lead to different legal, tax, and commercial outcomes. A model that works well for an early-stage company may be a poor fit for a more mature business, and the wrong design can create unnecessary complexity or unintended incentives.
The key question is therefore not which instrument is most common, but which structure best supports the company’s objectives and future plans for an exit.
In broad terms, an incentive program allows employees, board members, and other key individuals to participate in the company’s value creation and, over time, share in the upside of a future exit. In Sweden, these programs are typically equity-based, meaning that participants receive shares or a right to acquire shares on agreed terms. Although the legal and tax mechanics differ, the common feature of these structures is that they are intended to lead to share ownership. The structure chosen will affect matters such as investment risk, potential upside, ownership, and the timing and character of taxation.
Three models are particularly common in Sweden.
- Warrants (teckningsoptioner)
Warrants give the holder the right to subscribe for new shares at a predetermined price in the future. If the company’s value increases above the predetermined price, the holder may purchase shares at a beneficial price.
In Sweden, warrants are treated as securities and acquired at market value. If the structure is implemented correctly, any future gain is generally taxed as capital income rather than employment income, which is often a significant advantage.
- Qualified employee stock options – QESO (kvalificerade personaloptioner)
Qualified employee stock options were introduced to support smaller, growth-oriented companies in attracting and retaining talent. Qualified employee stock options also give the holder the right to subscribe for new shares in the future. The terms for qualified employee options can be highly beneficial and issued for free with a predetermined share price below market value.
Their tax treatment can be highly favourable. Where the statutory conditions are met, the participant is not taxed at grant or exercise. Instead, taxation is deferred until the shares are sold, and any gain is generally taxed as capital income.
That said, the rules are detailed and qualification is not automatic. Among other things, the company must remain below certain thresholds relating to employees and financial size, and it must generally not be older than ten years. There are also specific requirements relating to the participant’s role, working time, and remuneration.
- Employee stock options (personaloptioner)
Employee stock options give participants the right to acquire shares in the future but, unlike qualified employee stock options, do not carry a beneficial tax treatment.
This distinction has important tax consequences. Taxation will arise at exercise, and the value at that point is treated as employment income. In practice, this can mean that the participant becomes liable for tax before there is any liquidity available to fund it if the employee stock options are not converted in connection with an exit.
Even so, employee stock options remain a common alternative where QESOs are unavailable, where employees live and work outside of Sweden or where the company wants a structure that does not require an upfront investment on market terms as required for warrants.
Which model is right for your company?
There is no universal answer. The right structure depends on the company’s stage, the intended participant group, where your employees live and work whether the QESO rules can be satisfied, how the cap table should be managed, what the company wants the program to achieve over time and the company’s plans for a future exit.
Also, as incentive plans are based in tax law, where the company is established and where the employees live and work will affect which structures are available and the tax.
These are not merely technical questions. The design of an incentive program will influence behaviour, expectations, and outcomes for years to come. For that reason, the legal and tax analysis should always be considered together with the company’s broader commercial objectives, future fundraising and exit horizon.
How we work at Hansen
Designing an incentive program is ultimately a strategic exercise. It sits at the intersection of law, tax, governance, and business planning.
At Hansen, we help founders, board of directors, and management teams assess which model is most suitable in light of the company’s specific circumstances. We advise on strategy, QESO eligibility, prepare the necessary documentation, support approval processes, and help ensure that the structure is both robust in legal terms and clear to participants.
The objective is simple: to put in place an incentive program that is legally sound, tax-efficient where possible, and commercially aligned with the company’s long-term plans.
And lets not forget, for any incentive to work, communication is key.
Contact: Jennifer Lawler
