FINANCIAL PARTICIPATION
HMRC survey of share plans
Almost half of employees participating in SAYE share schemes said the provision of the plan encouraged them to stay with their employer, according to a large-scale study commissioned by HM Revenue & Customs.
The report, undertaken by the National Centre for Social Research, draws on two surveys, one with employers and the other with employees, in order to assess how all-employee share schemes are operating in organisations and their perceived effects. The study also included interviews with businesses which had never provided either a share incentive plan or SAYE scheme to examine the reasons why this may be so.
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KEY FINDINGS OF EMPLOYER SURVEY
This employer study involved telephone interviews with 984 organisations.
Incidence of share schemes
The results of the employer study showed that:
27% of organisations provided a SIP
26% provided a SAYE
10% provided both a SIP and SAYE.
Why set up a SAYE scheme
The principal motivations for setting up a SAYE scheme were:
to enable employees to participate in the ownership of the organisation (reported by 34% of SAYE providers)
to encourage employees to acquire shares in the organisation (26%).
After asking respondents for the organisation’s principal motivations for setting up the SAYE, respondents were then provided with a number of possible reasons and asked to rate these as either a major or minor reason or not a reason.
When asked about possible reasons for setting up the SAYE:
81% of employers agreed that increasing employee commitment was a major reason
74% of employers agreed that increasing employee motivation was a major reason.
Ease of providing a SAYE
The majority of the respondents found the rules very easy or quite easy to understand (58% and 28% respectively).
Only 5% of respondents found the rules quite or very difficult to understand.
Employee take up of SAYE
Over a third of all organisations offering a SAYE had 25% to 49% cent of employees belonging to the scheme and under a third had 10% to 24% of employees in membership.
Perceived effects of SAYE
Overall, employers reported that the SAYE had a positive effect on the organisation as a whole.
The greatest positive effect was reported on relations between the organisation and its employees, with 87% of employers reporting a positive effect in this area.
Productivity of the organisation was the one area asked about during the interview where respondents reported a mixed effect, with 51% of respondents reporting a positive effect and 45% of respondents reporting no effect.
Why set up a SIP scheme
The most common reason for setting up a SIP was to enable employees to participate in the ownership of the organisation (30% of SIP providers).
When asked about specific reasons for setting up a SIP, the most common major reasons included increasing employee commitment and increasing employee motivation (cited by 79% and 71% of organisations with SIPs respectively).
Setting up a SIP
The process of setting up the SIP was contracted out to an external provider in almost two-thirds of organisations (63%).
Employers who had set up the scheme in-house were asked about the setting up process. Set-up costs in terms of staff time were reported as moderate by 53% of this sample and minimal by 25%.
Feature of SIP provided
Partnership shares were used by 75% of organisations with a SIP and free shares by 57% of this sample.
Just under half of organisations with a SIP used matching shares (48%) and just under a third used dividend shares (30%).
Employee take up
Overall, nearly a third of the organisations providing a SIP had 25% to 49% of employees participating in the scheme and a fifth had 75% or more of their employees participating.
Perceived effects of SIP schemes
Half of employers said the SIP had improved the performance of the organisation, with a third (32%) perceiving no improvement.
The relationship between the organisation and its employees was cited as the most positive perceived benefit by employers of providing a SIP (82%).
The effect of the SIP on the productivity of the organisation was mixed; half of employers perceived the SIP had a positive effect (50%) and just under half of employers perceived the SIP as having no effect (45%).
KEY FINDINGS OF EMPLOYEE SURVEY
The employee survey was based on a sample of 2,253 employees in the UK. The main findings are these:
The majority of employees participating in SIP or SAYE schemes gave an “easy way to save” as the most common reason for taking part (94% of SIP participants and 99% of SAYE participants).
“A way to make money” was the second most common reason mentioned by scheme participants (reported by 91% of SIP participants and 96% of SAYE participants).
The most common reason for non-participation was not being able to afford to take part - 61% of non-participants in SIP providing organisations and 51% in SAYE providing organisations. The second most common reason was that employees thought they would not make enough money.
As many as 45% of SIP participants and nearly half (48%) of the SAYE participants said the provision of the scheme encouraged them to stay at the organisation.
Eight in ten SIP and SAYE participants (82%) strongly agreed or agreed that they felt loyal to their organisation, compared with 70% of non-participants (70%).
GLOSSARY
Save As You Earn (SAYE)
SAYE, also often called sharesave, is a tax and national insurance advantaged, all-employee share options scheme where employees can save up to £250 per month over a period of three or five years with an option to purchase their employers’ shares at the end of the period. SAYE allows an employer to give the employee the right to purchase a specified quantity of shares in the company, at a future date, at an agreed price using their savings.
Share incentive plan (SIP)
A share incentive plan is a tax and national insurance advantaged all-employee share plan. Employers can give employees free shares. Employees can purchase shares by way of deductions from their pay and employers can also choose to match the shares employees have purchased.
Source: Evaluation of Tax-Advantaged All-Employee Share Schemes, Research report 59, by Jane Kerr and Clare Tait, prepared for HM Revenue & Customs.
Want to know more?
Title: Evaluation of Tax-Advantaged All-Employee Share Schemes, Research report 59, by Jane Kerr and Clare Tait, prepared for HM Revenue & Customs.
Survey sample: This report comprised telephone interviews with 984 organisations and self-completion questionnaires returned from 2,253 employees in the UK.
Availability: You can download the 131-page report in PDF format from the HMRC web site at www.hmrc.gov.uk/research/index.htm.