Out-Law News 2 min. read

Employee share ownership on the rise, but Government should do more says expert

There has been a "significant rise" in the number of employees opting to take shares in the company that they work for as part of a remuneration package, according to a new survey.

Share plans and incentives expert Matthew Findley of Pinsent Masons, the law firm behind Out-Law.com, said that the results of industry body ifs ProShare's latest annual survey demonstrated the "continued resilience and popularity" of employee share schemes despite continuing pressure on disposable incomes.

According to the survey, the number of employees participating in both of the major HMRC approved employee share ownership schemes rose in 2012. Employees participating in the Save as You Earn (SAYE) scheme or a Share Incentive Plan (SIP) also saved more on average, ifs ProShare said.

Approved share schemes provide employees with a way of building up and ultimately benefiting from a financial stake in their employee company. There are currently four recognised schemes in operation which attract various tax advantages. These include the two types of 'all employee' plans: SAYE, where employees can save up their own money before deciding whether to use this to acquire shares in their company at a discount, and the more sophisticated SIPs, under which employers can offer the opportunity to purchase shares out of gross salary and possibly also matching shares and/or free shares. There are also two discretionary schemes: Company Share Ownership Plans (CSOPs) and the Enterprise Management Incentive (EMI).

According to the survey, the number of employees with SAYE accounts rose by more than 150,000 to just over 1.2 million in 2012. Last year, employees saved an average of £105.83 each month; up from £82.02 per month in 2008. The number of employees investing in SIP schemes rose from 908,905 to 960,988, with an average monthly investment of £83.37, according to the figures.

"Companies and their remuneration committees should be actively considering their approach to all-employee share ownership," Findley said. "It increases engagement, provides an opportunity for long-term wealth creation to supplement pension planning and demonstrates commitment to any perceived wider responsibilities on pay."

"The Government should also examine how to further increase participation in SAYE and SIP. It is clearly very focussed on employee ownership – in all its forms – but has concentrated too much effort on deeply unpopular and flawed measures like 'Employee Shareholder' status when a fresh look at, for example, the existing SAYE and SIP limits and their operation would be more productive in increasing employee share ownership," he said.

'Employee shareholder' status will be a third form of employment status, alongside 'employee' and 'worker', taking effect as a new form of equity-linked employment contract. In exchange for giving up certain employment rights, employees will become owners of a stake in the business that they work for by being giving shares in the employer company worth between £2,000 and £50,000. In exchange, an employee shareholder will not have certain rights which a 'standard' employee would have, including those in relation to unfair dismissal, redundancy and certain statutory rights to request flexible working and time off for training.

John Collison, head of employee share ownership at ifs ProShare, said that the results of the survey showed that share ownership continued to be "a popular, tax-efficient incentive for employees at all levels". He said that with the introduction of self-certification of approved employee share plans over the coming year, it would "become even easier for businesses and their employees to implement such schemes".

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