How can employee share schemes support an employer’s financial wellbeing strategy?

Need to know:

Employee share schemes, such as a share incentive plan (Sip) or a sharesave scheme, can help employees develop savings habits and financial confidence.
Share schemes can educate staff around organisation shares and how investment works, which can align well with employers’ financial education provisions.
Share plans can target employees’ medium and short-term financial goals; this complements a workplace pension, which tackles longer-term financial planning.

In 2017, an average of 43% of eligible employees participated in employee sharesave schemes, while 30% participated in share incentive plans (Sip), according to the Saye and Sip survey 2017, published by non-profit organisation ProShare in May 2018.

Employees therefore clearly have a considerable interest in share schemes, but how can organisations make full use of them to support a wider financial wellbeing strategy?

Creating a savings habit

The UK’s two main HM Revenue and Customs-approved, all-employee share scheme options, Sip and sharesave plans, also known as save-as-you-earn schemes, are both ideal starting points for an organisation looking to help employees put money aside and create a savings buffer.

This, in turn, can mitigate potential financial worries and boost productivity, which is particularly important for manual handling roles, where health and safety components are more prominent and distractions or sleep disruption could lead to injuries or accidents.

Gabbi Stopp, executive director at ProShare, explains: “Getting into a savings or an investing habit does help to reduce financial worry. It helps people feel more empowered and in control of their finances. [Employee share schemes] absolutely ought to be a part of any [organisation’s] strategy around [financial wellbeing].”

Partnership shares within a Sip, which enable employees to buy shares direct from their salary before tax deductions, up to either £1,800 or 10% of their income for the tax year, are particularly effective at building this savings habit.

Employee share schemes also provide a more flexible way for employees to save, in comparison to a pension, for example, notes Phil Ainsley, managing director of employee services at Equiniti.

"Share plans as an investment are a lot more flexible than pensions," he says. "[Employees] may use it for [their] pension, but equally if in three or five years’ time, [they] want to put a deposit down on a house or have a holiday or pay for [their] kids’ education, [they’ve] got the flexibility to do it.”

Greater financial awareness

Employers can further use employee share schemes, in conjunction with financial education, to help broaden staff financial awareness and employees to learn about investing, without immediately diving into a high-risk environment.

“Share plans can act as a bit of a light-bulb moment or a trigger to change their mindset,” Ainsley explains. “It can be just that first step on the wider investment ladder. [Employee share schemes are] a fantastic way of [employees] dipping [their toes] into the water of shares without the risk. [They] gradually get an understanding of what shares are all about. They’re a gateway for a lot of very good financial behaviours in the future.”

Help achieve financial goals

Incorporating employee share schemes into a financial wellbeing strategy can also help employees save for medium-term or short-term financial goals, such as a family holiday or a deposit on a house.

Jay Foley, managing director at Computershare Plan Managers, says: “[Sip and sharesave schemes in particular] have relatively short time-frames compared to a pension plan. These give [employees] the opportunity to address immediate needs.”

Employers that measure how much employees are contributing to a share scheme, and then uncover what they are using the gains for, might then use this data to inform other benefits or initiatives within their wider financial wellbeing strategy, tailoring their financial support to the specific workforce’s needs.

Employee share schemes certainly have a role within a financial wellbeing strategy as a tax-efficient savings tool that allows employees to put aside money each month without paying income tax or national insurance contributions.

“They are a really aspirational benefit, so they do allow people to dream a little bit about what a material boost to their finances could do,” Ainsley concludes.

In numbers: The changing statistics of employee share schemes year on year