REBA’s Inside Track: is it time to shake-up employee share scheme rules?
I’ve always been a strong advocate for employee share schemes (ESS), having benefited from a Save As You Earn (SAYE) scheme at a previous employer. Yet, the latest figures from HMRC suggest that the number of companies using these schemes is beginning to stagnate and in some instances drop.
Just over a month ago, REBA featured William Hill and its award-winning employee share save scheme, which had seen a 50% participation rate thanks to its innovative communication approach. Clearly, when the benefits of these schemes are outlined to employees they are incredibly popular.
On the face of it, the Employee Share Schemes statistics are positive. They show the number of companies operating an ESS in the tax year ending 2020 was 15,340. This is an increase of 6% from the previous year. However, the majority of this growth was in Enterprise Management Incentives (EMIs) where the number of schemes increased from 12,410 to 13,380.
SAYE, Share Incentive Plans (SIPs) and Company Share Options Plans (CSOPs) all reduced in number – be it only marginally by around 10 schemes apiece.
In 2007-08 there were almost 1,900 CSOPs, whereas there are now only 1,150. A similar decline can be seen with SAYE schemes, which have gone from 690 schemes in 2007-08 down to 470 in 2019-20. In comparison, SIPs have done marginally better reducing by only 40 schemes over the same period.
In light of HMRC’s revelations, the Esop Centre – a non-profit membership organisation that promotes broad-based employee share ownership – is urging the Chancellor to give all-employee share scheme rules a major shake-up to make employee participation much more attractive and relevant to changing employment and work patterns.
Esop Centre founder, Malcolm Hurlston CBE, said: “The share scheme rules reflect the time of their inception far more than the needs and circumstances of today and tomorrow. It’s time for a leap forward, not for more tinkering merely to shore up the existing system.”
In addition to falling numbers of schemes, the volume of employees being granted options is also decreasing. For example, employees granted SAYE options in 2019-20 was down to 310,000 from more than 400,000 a decade ago, while 20 years ago around 1 million employees were granted options.
We’ve already seen from William Hill that, provided the messaging, communications and technology are in place, employees are interested in participating in these schemes. So what can be done to encourage more organisations to use them?
As Hurlston alludes to, over the past few years the Government has ‘tinkered’ with these schemes to make them more appealing to employees. SAYE schemes now only require a minimum three year commitment, for instance.
However, what more could be done to make these schemes more attractive to employers both as an employee benefit and a reward mechanism?
We’d love to hear your views on this issue, so get in touch to tell us what would make your organisation offer an ESS.
The author is Dawn Lewis, content editor at REBA.
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