Incorporating employee share schemes into flexible benefit plans is an up-and-coming way to encourage employees to take advantage of share savings programmes. In recent years, a number of leading employers, such as Lloyds TSB and AstraZeneca, have started to include share incentive plans (Sips) under their flex brand. Doing so offers greater simplicity and promotes share ownership.
But, even with overall branding, share purchase under current rules is subject to separate administration. And sharesave schemes continue to be communicated separately. Chris Noon, head of business development for Hewitt Bacon & Woodrow, works with AstraZeneca. He explains: “Their flex scheme, AZ Advantage, incorporates a Sip within it although they also operate a sharesave plan outside flex.”
He explains that sharesave is set for either three, five or seven years whereas flex choices need to be made annually, fitting in with Sips. “Sharesave administrators tend to offer their services free of charge for larger companies and will communicate plans at set times.”
Sips also require separate administration since a flex plan requires the employee to make a salary sacrifice. “You would need a change in the law to change this as current Inland Revenue rules for Sips require the employee to make a contribution,” says Noon.
Anne Croft, a consultant with law firm Linklaters’ Employee Incentives Group, adds: “Flex plans are bespoke to the company and are not subject to a statutory framework. There could be an advantage in more legislation, but the Inland Revenue would want to be careful. Buying shares is not the same as giving up holidays in exchange for cash. You would need to agree a fair way of valuation.”
Communication can be integrated, however. Jacqueline Otten, principal with consultancy Towers Perrin, says: “There is a move to bring everything together to have everything in one place. Firms are trying to communicate what total reward means.”
Total reward statements can be a key communication tool for integrating shares with flexible benefits. Mhairi Kerr, marketing manager for Employee Share Services at Halifax, says: “Our parent company HBOS wants employees to see reward salary, plus a bonus, shares and flexible benefits. Statements show current share plans and those that have matured in the past year.”
Longer term, the government is actively looking at ways of encouraging saving through the workplace. Fred Hackworth, director of the Employee Share Ownership Centre, has been involved in talks at the Department of Work and Pensions. “With Sips, you are taking a punt on your own company. One idea might be to offer staff a wider choice though a Sip type vehicle, concentrating on blue chip shares. This could be a type of ersatz pension with tax breaks, [which could] be held perhaps for 10, or even 20 years.”
Meanwhile, Peter Cooley, director of Employer Solutions for Nelson Money Managers, says: “Share schemes have traditionally been seen as short-term methods of building capital but if they could be integrated with pension planning then the conversion to long-term savings would be complete.”
Case study
Lloyds TSB offers its staff access to a share incentive plan (Sip) through its flexible benefits package, Flavours, which was launched in 2002.
Tim Fevyer, senior manager, group compensation and benefits, says offering staff a single brand was viewed as essential although the Sip is administered separately. “Staff see it as integrated as there is a direct link on our website or they can go straight through to our call centre and talk about shares along with other benefits.”
In addition, the group’s 70,000 employees receive an annual reward statement on paper, showing the value of their benefits selections and share options.