Chancellor “missed a big opportunity” to reform employee share plans in Budget

Maria Brookes, – ICSA: The Chartered Governance Institute


Responding to today’s Budget, ProShare – the body representing employee share ownership (ESO) in the UK – said that the absence of reforms to all-employee share plans was “disappointing”. By choosing not to introduce changes to the way the Share Incentive Plan (SIP) and Save As You Earn (SAYE) plans operate the Chancellor had “missed a big opportunityto drive up employee share ownership in the UK. Research has shown that companies with higher levels of employee share ownership outperform those without, and that share plans are an effective way for low-income earners to save and build financial resilience.

Murray Tompsett, Head of ProShare said: “Employee participation in both SIP and SAYE is falling. Unless the government takes steps to reform these schemes, there is a risk that employee participation will continue to decline, and with it all the benefits we know these schemes can bring to both employees and employers, as well as the wider community.

“The Chancellor missed a big opportunity today, not just to remove some of the barriers to employee participation, but to give firms a much needed productivity boost. With UK productivity growth a constant challenge, a shift towards ownership structures which bolster innovation, employee effort and corporate long-termism should form a key part of the economic recovery plan.”

The Government’s own data shows that 290 firms offered an SAYE scheme in 2018-19 (the last measured year), down from 340 firms in 2010-11. The number of employees granted a new SAYE option in 2018-19 was 310,000. The last time new SAYE grant take up was that low was in 1986-7.

For SIPs, the picture is similar. In 2018-19 there were 470 companies at which employees were either awarded or purchased shares – down from 530 firms in 2015-16, and part of a general downward trend in recent years. The initial value of shares offered through a SIP is also on downward trajectory: in 2018-19 the initial value of shares offered was £660m, the lowest it has been since 2002-3.

David Mortimer, Head of External Affairs, ProShare added: The question is what can be done to reverse this trend? We believe that two reforms in particular would drive up staff participation levels. The first is reducing the SIP holding period from 5 to 3 years – a recommendation which is supported by the CBI. The second, is making resignation a ‘good’ leaver reason for SAYE & SIP.

“Whilst it is disappointing that the government has not taken on board these recommendations, ProShare will continue to push for these much needed reforms.”

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