Chevron has issued free shares to its UK employees for the first time as part of its annual incentive programme.
The energy firm has run an employee share plan since 2003, but its business structure, with groups of employees in different bonus arrangements, meant it had been unable to comply with HM Revenue and Customs’ free share legislation, which states free share awards must be made to everybody on equal terms.
Ashley Sanders, total remuneration adviser at Chevron, said: “During 2008, we were in a position where the parts of the business that had different bonus structures were being sold and were no longer in the share plan, so we were left with a tiny group of employees that were stopping us launching the free share plan for the other 2,200 staff.”
To overcome this, Chevron worked with Capita Share Plan Services to set up a new share incentive plan (Sip) in January and switch all staff into it to put them on an equal footing.
Chevron’s incentive plan is based on how business units perform against each other and on health and safety, as well as individual performance. Each employee is awarded a percentage score at the end of the year.
The lowest score attained for the last year, 8.5%, was the amount of salary all employees could opt to receive in free shares, up to a limit of £3,000 worth. If an employee was set to receive a bonus worth more than 8.5% of salary, they received the difference in cash.
Staff could access an online election tool for one week to decide whether they wanted to accept the shares. More than two-thirds (67.8%) elected to take some or all of the allocation. This resulted in the purchase of £4.3 million worth of free shares on behalf of employees in May.
The free share allocation was communicated to staff through information roadshows, newsletters and DVDs, which were sent to expatriate offshore workers.
Sanders added: “The key issue for us was the savings we could make – around £550,000 in employer national insurance contributions. The project cost about one-tenth of that. It also provided staff with the opportunity to make tax-efficient savings.”