With the cost-of-living crisis continuing to hold back the economic growth of the UK, the Treasury – under the leadership of Chancellor Jeremy Hunt – is looking to revamp employee share plans.
The government recently published a call for evidence on SIP and SAYE employee share plans. It seeks views from organisations and individuals on whether the two schemes are fulfilling their policy objectives and ways in which they could be improved and simplified. The consultation will close on 25 August.
In total there are 24 questions, split into five categories:
- the effectiveness and suitability of the schemes and whether they are fulfilling their policy objectives
- current usage and participation and whether there are barriers to participating in the schemes
- whether the schemes’ rules are simple and clear as well as whether they offer enough flexibility to meet individual firms’ needs
- whether the schemes suitably incentivise share ownership for lower income earners
- what other performance incentives businesses offer their employees and how these compare with SAYE and SIP
Employee share plans have long been seen as an effective tool for increasing staff retention and motivation. Employees themselves, particularly at the lower end of the pay bracket, benefit from improved financial resilience. In the 2021 report A stake in success: employee share ownership and the post-COVID economy, analysis of ONS data found that employee shareholders in the lowest income quartile have a median net financial wealth £10,900 greater than those who are not employee shareholders. In further research by HMRC, it was found that 87% of surveyed companies had felt there had been a positive improvement in the relationship between the company and its employees (“Engaging for Success: enhancing performance through employee engagement”).
Currently there is a Save as You Earn (SAYE) scheme, which allows workers to save money from their salary on a monthly basis with which to purchase discounted shares in the companies they work for.
The second key all-employee plan is the Share Incentive Plan (SIP) which allows employees to invest in company shares in a tax-efficient manner. The company can match the shares purchased by the employee, or even give up to £3,600 worth of Free shares each year.
However, these schemes can seem complex, and are often poorly promoted. In a recent evaluation run by HMRC, over a third of all surveyed companies had not utilised a share plan due to them being perceived as too complex to set up. The Treasury aims to remedy this and has issued a call for evidence on way to improve and simplify SIP and SAYE plans.
We welcome this consultation, which will have been influenced by the fantastic lobbying work that ProShare has been doing over the last two years to initiate a review of all-employee share plans. Our Head of External Affairs, David Mortimer, has pushed the case for share plan reform to more than 50 MPs from all political parties, and we are delighted to see the government moving forwards with further action.
“ProShare has tirelessly and consistently campaigned for the reform of employee share plans. We are really pleased that the government has listened to the case we’ve put forward and is actively looking at ways of improving and simplifying these key employee benefits.”
ProShare will be holding events to workshop industry responses and hear directly from the team responsible for the consultation in Treasury. If you want to participate, do watch out for dates over the next few days or e-mail Team@proshare.org to express your interest.
