The move is expected to cost the company about £30m. UK workers will not be able to sell the shares for three years, after which they will be taxable, unless they are held for five years.
“Our strong first half results and the progress we are making on our transformation have been made possible thanks to the hard work and action of our people”, the company said in a message to staff.
Rolls-Royce was hit hard by the Covid pandemic, which triggered a sharp decline in global air travel, heavily impacting the firm’s commercial aerospace business which sells and services jet engines.
Tufan Erginbilgic, chief executive, launched a transformation programme in January last year shortly after his appointment, describing the struggling firm as a “burning platform” and telling staff they faced a “last chance” to change.
Rolls-Royce, which employs 21,000 people in the UK, announced plans in October to axe 2500 jobs globally, to make the company “more efficient and effective”.
Since the changes, the firm’s fortunes have changed, with its revival in recent months pushing shares to a all-time of 501p on Thursday, after the business upgraded its profit forecast and reinstated its dividend for the first time since the pandemic.
“These results have been made possible thanks to your hard work and our collective actions. You are making the difference. It is therefore important that you share in our success,” Mr Erginbilgic told employees in the memo, which was first reported by the Financial Times.
“That is why we are giving you the opportunity to own part of Rolls-Royce,” the former executive at oil giant BP added.
“We want to recognise your contribution to our future success and reward you for the role you will play in it.”
Mr Erginbilgic, will not receive the shares award.
Russ Mould, investment director at AJ Bell, said Rolls-Royce had delivered “one of the most impressive turnarounds in living memory”.
“It’s certainly unusual for a company of its size to be able to produce such strong share price returns, but that just goes to show that Rolls-Royce was once stuck in a very deep hole and it has managed to climb back out,” he added.