Insurance firm Admiral has made changes to its restricted share plan to make the awards more tangible and attractive when recruiting senior staff.
The scheme, through which 929 staff received awards in May this year, is paid out each year to managers and star performers. A further 1,600 overseas workers also receive free shares through the scheme because they cannot get them through the firm’s approved share plan.
Stuart Clark, head of share schemes at Admiral, said the share plan was a useful tool when recruiting senior staff, but its value was often not appreciated by candidates because the vesting date was so far away (three years) and there was uncertainty about how many shares would vest.
Until this year, the amount of shares that would vest three years from the award date depended on earnings per share (EPS) growth. To achieve full vesting, the EPS had to be about 12 points above London Inter-Bank Offer Rate (Libor) over a three-year period.
“When senior staff move to Cardiff to work for us, they might be moving from London or Bristol, so are probably giving up some salary for the potential of greater rewards [through share awards],” said Clark. “But they could get nothing if EPS was low. Plus nothing was paid on those awards throughout the three-year period.”
To combat this, the free share awards made in 2009 were divided in two. Half were subject to the same performance criteria as previously, but the other half had no performance criteria.
Also, because the shares awarded within the plan do not attract dividend payments, from last month, Admiral will pay scheme members a bonus equivalent to the dividend per share each October and May. This is calculated on all unvested shares held within the scheme. For example, if an employee has 3,000 shares and the dividend is worth 27.7p, they will receive a bonus of £831. “[The changes] also maintain a high level of alignment with shareholders because we will pay the bonus only if there is a dividend paid,” said Clark.
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