Did the Chancellor, Rishi Sunak, miss a big opportunity to reform employee share plans in the Spring Budget? ProShare certainly thinks so – they're the body representing employee share ownership in the UK, part of the Chartered Governance Institute. Responding to the Spring Budget on 3 March they said the absence of reforms to all-employee share plans was "disappointing". They say that by choosing not to introduce changes to the way the Share Incentive Plan and Save As You Earn plans operate, the Chancellor had missed a big opportunity to drive up employee share ownership in the UK. They argue that companies with higher levels of employee share ownership outperform those without, and that share plans are an effective way for low-income earners to save and build financial resilience. Obviously this is relevant to HR so no surprise to see it was featured in The HR Director which quotes Murray Tompsett, Head of ProShare, who says unless the government takes steps to reform these schemes there's a risk that employee participation will continue to decline. So let's consider why that might be, and what could be done about it, with share plans specialist Fleur Benns. I phoned Fleur and asked if ProShare is right in saying these plans need protecting:
Fleur Benns: “Yes, so yes, the tax efficient all employee share plans are generally considered to be a key tool in encouraging employee share ownership and, unfortunately, it has been shown that over a number of years there has been a decrease in participation and the numbers of employees who are participating, and the number of companies that are offering these schemes, has reduced. We know that ProShare have been lobbying hard for these changes that you mentioned, particularly the 5 to 3 year holding period for SIPs which is felt to discourage people from saving. You know, 5 years is quite a long time for people these days to stay with one company and it's felt that that reduction to 3 years would encourage people to participate more, and also for good leavers to include people who are resigning and would therefore get tax favourable treatment on the exercise of an SAYE option, for example, would be a way of encouraging more people to save towards these schemes and to increase employee share ownership.”
Joe Glavina: “So do you think the government will make the changes ProShare's calling for?"
Fleur Benns: “Who’s to say? I think the Chancellor has got a lot on his mind at the moment but, generally, employee share ownership is seen as a good way of encouraging increased productivity. There's a lot of studies showing where you have employee participation and shareholding that companies generally perform better and therefore this is something that I think going forward, as we come out of this COVID period, that the Chancellor should be concentrating on.”
A scheme that did see changes in the Budget is the EMI option scheme. There were two announcements with direct relevance to EMI. Fleur explained those in detail in our programme 'Budget announcements affect EMI options' That is available now for viewing from the Outlaw website.