Royal Mail workers will be offered a 10% stake in the company as the Government steps up plans for a flotation amid a recent rally in financial markets, it has been reported.
Ministers are in advanced talks about giving the shareholding to staff at Royal Mail, who could be offered attractive incentives to buy shares or even be offered them for free, according to The Sunday Times.
The privatisation will be the country's biggest for more than 25 years, since the British Telecom and British Gas shares sales in the 1980s.
It is thought that investment bank UBS tested the market appetite for a stock market listing before Christmas and that the recent gains seen on the FTSE 100 Index - which enjoyed its best January for 24 years - has spurred on plans for a possible flotation.
But the terms of the staff share deal must reportedly be put in place before a listing can go ahead.
Royal Mail also needs to finalise a new pay deal with unions as a two-year pay agreement is set to expire at the end of next month.
A stock market flotation is only one option for Royal Mail's privatisation, with the Government also considering the potential for a sale to a rival or private equity fund.
The privatisation plan is being led by business minister Michael Fallon.
Royal Mail saw a leap in underlying earnings in the six months to the end of September, to £144 million from £12 million a year earlier.
A rise in parcel deliveries on the back of a surge in internet shopping is helping offset ongoing declines in its letters business.