Need to know:
- Employee share schemes can help organisations attract, retain and motivate staff.
- But these are not always as valued as they could be by employees.
- Effective communication is essential, including video, apps and presentations.
In March this year, 9,200 Marks and Spencer staff who had been paying into a share scheme saw bumper payouts, as its four-year sharesave plan matured. It meant someone who had paid in £150 a month received more than £10,000, based on the growth in the share price.
It is just one example in a long list of successful share schemes where employees have benefited, with the added advantage that in a sharesave scheme employees will not lose money, even if the share price itself falls.
Other options are also available, including share incentive plans, company share option plans, which give employees the option to buy up to £60,000 worth of shares; enterprise management incentive schemes, which are typically better suited to smaller organisations; and growth share schemes, which allow employees to benefit from the growth of a business without impacting on the value achieved by founding shareholders.
Employee loyalty
For employers, the use of such schemes means staff are more likely to remain with the business, and will have more of an interest in meeting wider organisational goals. Nicola Smyrl, a partner at Taylor Walton Solicitors, says: “Share schemes can make employees feel that they have a stake in the business and encourage loyalty.
“They can also be a useful part of attracting new employees. With many businesses facing genuine recruitment issues, these types of benefits can make the difference between an individual choosing one business over another.”
The 2022 Gartner Total rewards employee preferences survey, conducted in August and September 2022, suggests employees value benefits such as base pay and time off ahead of share schemes, but also appreciate the potential of such plans. Kayla Velnoskey, senior research principal in Gartner’s HR practice, says: “Preferences for these incentives vary by employee demographics and by the type of long-term incentives offered.
“Entry-level or more junior employees tend to value cash incentive units and performance stock units, which are awarded to them without requiring their own financial investment. In contrast, more senior employees are more likely to value stock options.”
Effective communication
Yet part of the reason why schemes may not be fully appreciated may be how they are communicated; often they are promoted to employees in long, complicated documents at the start of their employment, or when the employee is invited to participate, and then not really mentioned again, says Smyrl. “This means that the employer can miss out on explaining to the employee why the scheme has been put in place and how it can benefit them,” she says.
“Effective communications tend to be presented in a clear, simple way which focuses on the message that the business wants to impart, without overselling the benefits of the scheme. The choice of vocabulary and imagery can be important, as making employees feel like the success of the business will have a direct impact on them can be effective in encouraging participation and engagement.”
Organisations should take a varied approach to ensure they have the best chance of engaging people, says Jay Foley, managing director, plans, Europe, Middle East and Asia (Emea), at Computershare. “Experience suggests that video, including of a CEO for example at a town hall, can be effective, as can providing content in multiple languages,” he says. “Mobile apps where participants can enrol directly from their phones are particularly popular, and also set up the participant to transact or download statements using their mobile devices once enrolled.”
Employers often provide summaries or FAQ documents but need to go further, says Ian Fraser, employee incentives partner at law firm Harper James. “Less regularly, [employers] organise presentations to guide employees through the structure of the scheme and what it means for them,” he says. “This can be the most effective approach but is more expensive if external advisers are brought in to make the presentation.”
Communicated well, a robust share scheme combined with competitive base pay, time off, career mobility and performance-based recognition can help organisations set their employee value proposition apart from competitors, says Velnoskey. “Incorporating employee share schemes as a key component of the benefits package helps build a more motivated and engaged workforce, ultimately contributing to the long-term success and stability of the organisation,” she adds.
