Employee share plans should fit business goals, says CIPD

The warning comes from the Chartered Institute of Development (CIPD). Its recent survey found that around two fifths of employers offer all-employee share plans.

"Employee share plans can help to make employees think more like an organisation's owner," said CIPD 'Reward Adviser' Charles Cotton. "This leads to greater attention being given to the overall success of an organisation and not just their personal positions."

But he warned that organisations that do not also invest time and resource in the implementation and communication of a plan run the risk of losing out on these benefits. "This can be counter-productive and lead to low morale and recruitment and turnover problems," he said.

CIPD says the plans need ongoing communication and maintenance to meet organisational objectives, motivate staff and benefit the business.

"Employers should consider them an integral part of the total reward package, working with staff and line managers to implement a package that meet the needs of the business and employees," said Cotton. "It is essential to align share plans with the wider business objectives and with the organisation's culture if they are to succeed."

CIPD has published a new book, Employee share plans: supporting business performance, to help employers implement effective share plans in the context of the tax and regulatory environment, as well as new accounting standards.

New standards for share-based payments came into force last year. Organisations now need to recognise the cost of providing share incentives as an expense. CIPD's own research indicates that most organisations appear to be reviewing their employee share plan design (either broad-based or executive) rather than cancelling them.

Sara Cohen, the report's author, said, "The new accounting standards have made a positive impact by encouraging some organisations to look more closely at the return on investment rather than simply selecting a plan because it has no cost. This will encourage employers to investigate different arrangements and then develop a plan that meets the needs of the business. The report covers a number of issues that employers must consider when implementing the standard and communicating share plans in general. "

Rory Cray, a Senior Associate with Pinsent Masons' Share Plans team, said: "The new study appears to back our own experience: share plans have never gone away. Within organisations, they can be an effective staff communication vehicle. Scrutiny by shareholders is also giving companies new opportunities for engagement and consultation, which can result in companies obtaining shareholders' backing for share plans that are bespoke and a 'fit' for that company, rather than having a 'one size fits all' plan."