Nigel Watson

Financial resilience has been defined as the ability to cope financially when faced with a sudden fall in income or unavoidable rise in expenditure. Being financially resilient does not mean having lots of money, it means having a strategy or a plan for coping with whatever life throws at you.

Interestingly, as a result of Covid-19 (Coronavirus), companies are recognising the importance of making their own businesses more resilient, replacing "just in time" with "just in case". So, having established that having a plan for coping with financial reality is a good thing, what more could employers do to help staff prepare for "just in case"? Well, by having a plan of course - an employee share plan.

Employee share plans are pretty resilient in their own right. Some were created by legislation more than 30 years ago and are as relevant today as they were then. There is no joining fee or hidden administration cost passed on to the employee. As a means by which to participate in shareholder democracy, employee share plans are remarkably transparent and free of the usual financial services jargon.

Some share plans are very good at performing that neat trick of taking bits of money each month from a salary so as to create an accumulated savings pot from which to buy shares. The all-employee share incentive plan goes one better by potentially giving participants something for nothing - free shares in their employer.

Most employee share plans benefit from certain tax advantages, thereby allowing participants to keep more of any gains for themselves. Over say three, four or five years, share price growth has a knack of delivering an investment return in excess of both inflation and the money committed. And even if the share price did fall, there would still be something to show for sticking with the savings habit of being financially persistent.

So, what are the lessons for employers thinking about operating an employee share plan? Assist employees to make reasonable decisions about their financial situation and help them to become financially resilient by starting a savings habit that operates in conjunction with or as part of a share plan. Help them to understand the importance of "just in case" and communicate the power of persistency.

If a diamond is just a lump of coal that stuck at it, then with encouragement and the odd nudge, you might be able to help your employees stick with it long enough to discover their own unique diamond, which if you are an employer, makes employee share plans worth investing in.

Nigel Watson is a partner specialising in share plans and incentives at the law firm Burges Salmon