Building financial resilience for employees

Building financial resilience for employees

Earlier this month at our annual conference, Governance 2022, Head of ProShare, Murray Tompsett led a session on building financial resilience for employees. If you missed it, we look at the highlights from the session.

As well as being proven to increase a company’s productivity, employee share plans produce a more engaged and focused workforce and, crucially as we start to feel the full impact of a cost of living crisis, one which is more financially resilient. The case for wider rates of employee share ownership is compelling, but what other financial education initiatives can be put in place to help employees' financial wellbeing?

We are all too aware of the cost of living crisis right now. The cost of everything seems to be rising, with massive increases in oil, gas, petrol, and electricity prices. The cost of the weekly shop seems to have jumped massively, and wage increases are simply not keeping pace with these expenses.

According to research by Aegon last year:

  • 40% of the population have less than £100 left at the end of the month
  • 29% of people do not have any emergency savings – and this chimes with a figure from YBS where 26% of workers said they had less than £500 in savings

Other stats in the research from Yorkshire Building Society (YBS) last year show that:

  • 40% of 18 to 34-year-olds in work would be unable to manage for more than a month if they found themselves out of work and without their salary.

Almost half of workers in the UK - across all income brackets - said they feel stressed about their financial situation

And during the pandemic, 1 in 4 people said they had to borrow money from friends or family.

There are ways to help address these issues, and to improve the financial wellbeing and resilience of employees, and employee share plans are central to these.

These are plans that companies put in place to allow their employees to purchase shares in the organisation and become shareholders. Typically these are listed companies, but some private companies offer share schemes to their employees too.

There are many types of employee share plans, EMIs, LTIPs, share option plans, Deferred Bonuses and many others, but the ones Murray spoke about are usually referred to as all-employee share plans. These are HMRC approved, tax-advantaged plans which must be offered to all staff on the same terms.

The savings or contributions to these plans are taken direct from salary, making it as painless as possible for the participants, and meaning there’s no temptation to spend the money elsewhere! And importantly, they have been proven to provide benefits to the employer as well as the employees.

Save as you Earn

The oldest of these plans is the Save as you Earn – an SAYE, often referred to as a Sharesave. This plan came into existence with the Finance Act of 1980 under Margaret Thatcher's Conservative government.

In a nutshell, under an SAYE plan, employees are offered the right - (known as an ‘option’) - to buy a pre-determined number of shares in the company, at a date either 3 or 5 years in the future. The price of the shares to be bought is pretty much the actual market price at the time of the offer, but this price can be discounted by up to 20% by the company. And in fact, 80% of companies who offer this plan do offer the full discount.

Participating employees must then save a fixed amount of their choosing between five and 500 pounds each month, for either 3 or 5 years – 3 years is by far the most popular choice. The aim is that in those 3 or 5 years, the company share price will rise and rise and then, when the options become available to the participants at the end of the savings period, they use their savings to buy the shares at that discounted price. They can then either hold onto the shares as shareholders and start to receive dividends and so on, or they can immediately sell some or all of them, and if the price has risen, make a nice gain for themselves.


The second of the two main all-employee share plans is the Share Incentive Plan, or SIP as it’s better known. Sometimes also known as Buy as You Earn.

This plan was introduced in the Finance Act of 2000 by Gordon Brown under a Labour government. Employee share plans are popular with politicians from both the left and right. For the Conservatives, it appeals to their concept of a wider shareholder society, and for the left there are elements of a redistribution of the wealth and workers receiving fair reward for their labours.

In this plan, participants invest rather than save. Monthly contributions between £10 and £150 are deducted from pre-tax salary and used to purchase shares – known as Partnership Shares - on the open market. This is typically done by the share plan administrator. Many companies add to these with Matching or Free shares, sometimes both!

So, these key all-employee share plans are a real benefit for the participants and can really make a difference to their finances. Most companies who offer an SAYE launch them on an annual basis, whilst the SIP is an ongoing or ‘evergreen’ plan, with participants able to stop and start, or change their contributions on a monthly basis.

What we have seen is that these plans instil a level of financial awareness or acumen to their participants. They breed good habits – participants get used to the idea of putting something aside each month, they are more engaged with pension provisions, they look into additional financial tools such as ISAs. And this is vital for the long term financial resilience of employees.

Another piece of key research in this area is the ProShare Annual SAYE and SIP Survey. We’ve been compiling this key report for many years now and no other survey covers as much of the UK share plans market, which makes it an essential tool for benchmarking against good practice and market trends. It’s also a key document for companies looking to launch new share plans. The new report which covers the whole of 2021 will be launched on August 2nd and issued to all members.

Some of the stats included in its 60 pages include the weighted average monthly investment in a company’s SIP has risen to £85.61 – arecent high.

The weighted average value of a participant’s SIP holding as at the end of 2021 was £10,294. A significant amount and a key element in ensuring a participants’ financial resilience.

The case for employee share plans as a force for good in providing financial wellbeing and resilience is undeniable. But they don’t just benefit the participant employee, they are proven to benefit the companies that operate them too. Not only do these plans lead to fewer absence days, improved morale and a far more engaged workforce, but research also shows that all-employee share plans have a significant impact on productivity, with a 4.1 per cent long run improvement in performance for companies with an SAYE, and even more for companies with two share plans in place.

Murray Tompsett, Head of ProShare

Got a question about employee share plans or employee share ownership?

Get in touch with us if you have any questions about share plans. If we don’t know the answer ourselves, we will definitely know someone who does!


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