Need to know:
- Employee share schemes can be successful savings vehicles for staff.
- Take-up of share schemes depends in part on how well they are promoted; the current trend is to make communication as tailored as possible.
- Involving staff in pushing schemes and showing previous outcomes can be effective.
The research, A stake in success, published in May by the Social Market Foundation (SMF), suggests low-income workers who take advantage of employer share schemes could end up better off by £10,000. It’s a significant sum of money but the report also indicates that fewer than 5% of them overall are currently invested in such plans.
How can employers ensure that staff are aware of how beneficial these schemes can be to their financial wellbeing? Murray Tompsett, head of employee share ownership body ProShare, points out that take-up rates in businesses where employee share plans are offered are much higher than 5%. “When they are communicated to eligible employees clearly and concisely, there is usually an initial take-up of around 35%,” he says. “But participation rates can vary and can even be in the high 90s, depending on the [organisation] and industry sector.”
Often, though, such schemes are let down by poor communication. “For many employers with time and budget constraints, rehashing previous years’ communications is often the norm,” says Zoe Denny-Thomas, equity communications practice leader Europe, the Middle East and Africa (Emea) at Aon. “But, now more than ever, employers are reconsidering this approach in favour of a more engaging and re-invigorated campaign that explains everything employees need to know.”
Engage employees with saving
Tompsett says he’s now seeing a trend towards share plan administration firms tailoring communication to individual businesses, based on their sector or type of employees. “Many of our members are using new and innovative ways of communicating with their employees, such as tailored emails to different employee demographics, WhatsApp messaging, video clips with senior execs discussing the plan, ‘local champions’, virtual townhalls, personalised animations and so on,” he says.
Any communication plan will have an educational element to it, explaining how schemes work and how they can help to build employees' financial resilience. “Where practical, an employer should consider workshops, webinars or similar, rather than just providing employees with written information,” suggests Monica Ma, employee benefits share incentives expert and consultant solicitor at Keystone Law. “A chance for employees to ask questions will help them better understand and feel more comfortable about participating in the scheme.”
Promote financial wellbeing
Andrew Drake, head of client development at Buck, advises organisations to show potential outcomes of schemes, drawing on previous performance. “[Employers] need to bring share schemes to life and show what they mean for employees on an individual and personal level,” he says. “Effective modelling of what the outcome might look like for each employee can help cut through the technical jargon.”
Such exercises could also dispel myths around plans and help employees to see that they can be a great savings vehicle. “Many barriers to entry for share schemes, such as a lack of knowledge, can be overcome through education around not just the schemes themselves but how these can fit in with a person’s overall short-, medium- and long-term savings goals,” points out Ian Bird, a partner at Secondsight. “The use of case studies or testimonials from staff members who have had success with these schemes can be extremely useful.”
Staff can get involved in helping to promote the benefits of share schemes among their peers, suggests Ifty Nasir, co-founder and CEO of Vestd. “We give our customers materials to distribute to their team members to explain everything, but we’ve also had customers create a bit of fanfare around their schemes,” he says. “One announced their share scheme as a surprise at the Christmas party for example; that’s an excellent and energising way to kick things off.”
While there will inevitably be some criteria around who can access a share scheme, making it too onerous or restrictive can also put people off. “We have seen share schemes which have resulted in employees becoming disgruntled with their employers given the numerous conditions stipulated, complexities, different classes of shares and rights, impossible targets, unrealistic timeframes, significant buy-ins, or restrictive exercise conditions,” warns Karen Holden, CEO of A City Law Firm. This can also make it harder to communicate.
Fiona Bell, partner, employer solutions, at RSM, stresses the need for ongoing communication, rather than just at the launch of any plan. “Benefit statements should include share plan awards, pay discussions need to reference equity opportunities, and management can give updates on targets or share price,” she says. “To maintain enthusiasm, many [organisation's] appoint a share scheme champion with a key objective to promote the plan throughout the year.”
Ensuring people want to take advantage of share schemes makes sense for both employees and their organisations, says Bird: “If employers look out for their staff, the staff will in turn be happier, more engaged with the work they do and more involved in the [organisation's] success.”
