- Employees need to know a share scheme’s structure, aims and how to participate.
- Videos, infographics and interactive resources can be visually appealing and engaging.
- Using clear language that does not patronise is key.
There are a number of different ways that employees can hold equity in their organisation. Share schemes can appear complicated, which presents an opportunity for employers to support in this area. There are some key tips employers could consider to maximse the effectiveness of their share scheme communications for employees.
1. Clearly communicate scheme details
UK share schemes include sharesave schemes (alson known as save-as-you-earn (SAYE)), share incentive plans (Sips), enterprise management incentives (EMI), and company share option plans (C-sops). All employees can join sharesave schemes and Sips. Employers can elect employees to join EMIs and C-sops and should communicate related terms such as malus and clawback.
Sharesave communications should include what to do with savings at the end of the three- or five-year period, as well as how to pay capital gains tax if the sale triggers payment, due to the reduction in the annual allowance and tax rate increase, explains Natasha MacLeod, head of brand and creative at Equiniti Group.
She adds: “Sip communications should include if free shares are awarded on an opt-in or out basis, as well as whether they are available to be sold at the holding or taxable period end. Partnership share participants receive dividends paid on their Sip shares, so the annual dividend allowance reduction means more employees may have to pay dividend tax. Employers should explain this and how to change from cash to reinvested dividends.”
Sip notices should include information about statutory neonatal care pay following changes to Sip partnership documentation in April.
Vesting participants decide how their tax should be paid, with a choice to sell sufficient shares to cover tax and sell or keep what remains. Employers should confirm the amount of the award that vests where performance targets determine this.
Ifty Nasir, founder and chief executive officer of Vestd, says: “Employees should know how many options they have, and their current and potential future value. Employers should communicate their vesting schedule, which is the timeline and conditions that determine when an employee earns full share ownership. This could be based on time periods, performance-related goals, or both.”
2. Explain the costs and rewards
Communicating the impact of participating in a share scheme to employees is key to understanding and engagement. This includes whether the scheme will affect monthly pay or benefits entitlement, such as maternity leave payments, and any associated costs. Employers should also cover how it fits into the context of a remuneration package.
Employers should also communicate the incentive value on award and the circumstances in which it will pay out, says Veronika Lipinska, director of share plans and incentives at accountancy firm BDO. “They should also explain how it links to their strategy, any restrictions, whether the incentive will allow the employee to earn dividend income or equivalents, what will happen if they leave, and who to contact,” she says. ”Other points include tax implications and whether the incentive is tax-efficient.”
Robert Postlethwaite, partner and managing director of Postlethwaite, adds: “The key thing is communicating the way schemes work, what an employee has to do if they want to participate, where they find the funds if they need some, and how to eventually sell their shares and when. The varying risks are important to note too.”
3. Ensure all-round communication
Clear communication can be a powerful catalyst for running a successful scheme and ensuring that employees are engaged, informed and supported throughout.
Employers should think about their workforces and adapt communication to their working patterns. While some may be office or home-based, others work in environments where technological resources may be limited or non-existent. Meanwhile, different generations have varying communication preferences.
“Acknowledging diverse circumstances is crucial in ensuring that every employee has access to the necessary tools and information to participate effectively in the share schemes,” says Equiniti’s MacLeod. “By adopting an inclusive and accessible mindset, employers can ensure that campaigns are designed with flexibility and options to capture and engage every employee, regardless of their preferred method.”
4. Consider multi-channel communications
To be effective, communication must be frequent and timely. It is useful to regularly remind employees whether their awards have increased or decreased in value. Employers can also use a total reward statement to remind employees of the scheme, while existing internal channels such as newsletters or intranet platforms can be used to share updates, success stories and deadlines.
Typically, an explanatory booklet is circulated at the outset containing the scheme’s structure, its aims and how to participate, says Sam Taylor, solicitor in Burges Salmon’s corporate incentives team.
“Management can take the lead with informal question-and- answer sessions, while in-person town-hall sessions can clarify any gaps in understanding,” she adds. ”Employers could develop visually appealing digital resources such as videos, infographics, or interactive presentations that highlight long-term advantages, and use real-life examples that resonate.”
5. Avoid over-complicated jargon
Employers should be confident that the language they use to communicate will be understood by employees. Breaking concepts down into manageable chunks is key, along with a relaxed tone and language.
“Jargon can be employed but should primarily be in service of giving a full picture of how the scheme will affect employees,” says Taylor. “The language used should be suitably technical to convey the impact of the awards and the responsibilities, but simple enough to allow for employees of differing levels of financial sophistication to understand and engage with.”
Jargon can be complex and daunting, so creating a frequently asked question sheet can help.
“Some of the terms may seem specialist but are actually fairly simple to understand,” says Nasir. ”A glossary of key terms will help employees understand these factors, while online tools and visual explainers can demystify jargon.”
6. Offer financial education support
Employers can help employees to budget for saving by offering financial education or money wellbeing sessions to identify where they could cut spending. A scheme champion or team can address any questions and host virtual sessions for guidance, while chatbot or AI-powered tools provide instant support.
Employers could also highlight creative strategies for employees to redirect disposable spending towards a scheme, such as swapping a weekly takeaway for saving, says MacLeod. “Modelling tools project how savings could grow over time, helping staff to make spending and saving decisions,” she adds. ”Tracking investments through an app can help with increasing or decreasing contributions.”
While there are many points to consider when communicating share schemes, employers should ensure their methods are transparent, informative and engaging.
