Uptake frenzy stalls Arla Sip

Arla Foods has been forced to scale down its post-merger all employee share scheme due to overwhelming popularity among staff.

The food manufacturer, which was formed from the merger of Express Dairies and Arla Amba in October 2003, is now in the process of merging its two benefits packages together. It introduced a buy-one-get-one-free share incentive plan (Sip) in May last year, but was forced to slash the number of shares on offer because too many employees had subscribed to the scheme.

The company wanted to ensure that the future of the business was not put in jeopardy because of the popularity of the benefit.

Jason Shelley, HR services manager, said: "We had to cut back everybody’s share allowance by 55%. The maximum number of shares per employee was [previously] 125 but it was scaled back to 56.

"Our calculations showed that the shares would be oversubscribed within future years, so the allowance was scaled back in line with the projected number of options we could issue over ten years," he added.

All workers with over six months service were eligible to buy shares and 1,800 took part. Shelley said that it originally launched the Sip to encourage employees to own a part of the new business, and thereby to increase engagement.

The scheme was one of the first benefits launched to all staff from both companies. "In terms of administration [of the merger], it’s an absolute nightmare. We’ve integrated some benefits but it’s been very cosmetic; it’s just been stuff that we can do within negotiating with the unions."

Talks of further benefits changes are still underway. "We’ve protected any existing benefits at the moment. However, we are getting to the point where we need to come up with one consistent set of benefits. Things might be diluted but it’s probable that the best bits of both worlds will be taken forward.

"We need to be very careful about the way we do that and because most of the business is negotiated with union representation, we would find it very difficult to dilute anything," said Shelley.