Share plans continue to entice many thousands of UK employees to part with their hard-earned cash, despite the economic downturn, and it is no surprise why.
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- Hundreds of thousands of employees continue to save through share plans despite the economic downturn.
- YouTube videos are a new way for employers to engage employees with their share plans.
- Employers need to help employees to think like shareholders.
The possible windfall awaiting savers on maturity of their share plans can be substantial, making the low-risk sacrifice worth it.
Sainsbury’s share plan strategy is a case in point. More than 11,000 staff enjoyed a windfall of up to £2,000 each after saving between £5 and £250 a month in the supermarket chain’s three- and five-year share schemes earlier this year.
The latest share plan figures in the SAYE (Sharesave) and share incentive plan survey 2011, published by share ownership trade body IFS ProShare in June 2012, show that 414,511 employees took up new three-, five- or seven-year sharesave contracts in 2011, slightly down on the 443,541 that did so in 2010.
Average monthly savings for new schemes in 2011 were £102 per member, up slightly from the £101 recorded in 2010.
By comparison, 908,905 employees took part in share incentive plans (Sips) in 2011, compared with 911,346 in 2010, according to the IFS ProShare survey. The average monthly investment in Sips fell slightly from £73.44 in 2010 to £71.86 in 2011.
But how can employers engage and communicate the value of share plans to staff who have yet to sign up to a scheme, or to experienced share savers who have, for whatever reason, stopped using share plans?
There is a clear correlation between comprehensive employee communication strategies and high take-up of share plans
Henderson Global Investors, for example, has a take-up rate of between 70% and 80% across its nine share plans, which its share plan manager, Shelly Ribbons, attributes to the organisation’s commitment to running a communications strategy throughout the plans’ lifecycle, and providing tax guidance for staff when their share plans mature (see box).
Louise Drake, national sales manager at YBS Share Plans, one of HM Revenue and Customs’ (HMRC) approved share plan administrators and part of Yorkshire Building Society (YBS), says sustained communications are key to keeping employees engaged once they have signed up to a plan, and the more imaginative the campaign theme, the better.
Iain Wilson, client relationship director at Computershare Plan Managers, another HMRC-approved share plan administrator, adds: “Given the turnover of staff, if employers are not inviting new staff [to join a plan] on a regular basis, plans fall into disrepair very quickly. You can’t just launch a plan; you need to maintain it.”
Communication methods are just as important as frequency. Posters illustrating how share plan savers can spend their windfall, such as on a luxury holiday, are a traditional way to engage employees.
But engagement strategies are changing. Drake explains: “Traditionally, we did [employee] presentations, but now it’s more about doing a webcast and bespoke videos and uploading them to YouTube, or, if you’re lucky, uploading it to [an employer’s] intranet site. Some [employers] also have company radio stations.”
But employers must ensure their chosen communications channel suits their workforce demographic, rather than being swayed by the latest communication trends. Employees should be able to interact with a share plan in whichever way they please, which for some may be printed literature, while for others text messages are more convenient.
Launching plans in the context of a wider corporate strategy can also help to engage staff. Sainsbury’s, for example, aims to increase the number of employees holding shares in the business by 25% by 2020 as part of its 20×20 Sustainability Plan, published in March 2013, and regularly reminds employees of this goal.
Encouraging employees to think like shareholders in their organisation is also a great way to engage them with the benefits of share ownership. Wilson says this can be done by removing barriers to share plan entry, for example by setting manageable minimum contribution levels.
The government’s move to boost the number of employee-owned UK businesses may also help employers to engage staff, assuming that employees are happy to relinquish some key employment rights.
The new employment status, due to be introduced on 1 September 2013, will enable employers to offer new recruits tax-free shares in exchange for them forfeiting major employment rights relating to redundancy and unfair dismissal.
Research by the London School of Economics (LSE) with Computershare Plan Managers, entitled Share plan survey and published in August 2009, shows employees with no intention of joining a share plan may feel more committed to remaining with their employer because of the effort they see it investing in its employees through the plans.
Alex Bryson, research fellow at LSE, says: “Data from the survey has made it possible to determine, for the first time, socio-economic reasons for the take-up of a share plan.”
Employers should remember that share plan success is not just determined by employee take-up alone; there are peripheral benefits from engaging employees in plans.
Case study: Henderson Global Investors sees high take-up of share plans
Henderson Global Investors has a take-up rate of between 70% and 80% across its sharesave scheme and share incentive plan (Sip), which is no mean feat given that the investment firm operates nine share plans.
Henderson operates a variation of plans across 20 countries, including: a UK and a US sharesave; a UK and an international Sip; an employee stock ownership plan; and a restricted share plan, which was launched in 2004 for senior employees and has performance conditions attached to it.
Henderson offers employees in the Sip two matching shares for every share they buy, as well as free shares.
Shelly Ribbons, share plan manager at Henderson, and her team manage the communications strategy for all share plans in-house. They produce a brochure for each plan and for each country, as well as running staff presentations. Video link presentations are used for expatriates.
Ribbons says: “We don’t just communicate at the launch of a plan, but through the lifecycle of the plan as well.
“Employees are also offered tax guidance when share plans mature, which Ribbons is well placed to do as a former tax manager.
Quirky initiatives to help promote the value of the share plans this year have included an Easter campaign that saw Ribbons and her team present employees with Easter eggs carrying stickers showing Henderson’s option price.
“We try to give as much information as possible to employees in simple terms, without overloading them,” says Ribbons.
Viewpoint: Paula Hargaden, senior associate, Burges Salmon
Employers can take a range of approaches in choosing schemes to offer employees.
Of the four approved schemes, two, the share incentive plan (Sip) and save-as-you-earn (SAYE) or sharesave, require awards to be made available to all eligible employees, while the company share option plan (Csop) and enterprise management incentive (EMI) permit awards only to selected employees.
Sip and sharesave engage, and so are communicated to, the whole workforce, but for senior executives, an extra incentive using EMI or Csop is appropriate.
Communications to both staff and executives about approved share schemes must be tailored similarly. Care should also be taken to manage communications to encourage participation and deliver the intended incentive effect. This might involve tailoring communications and channels used to target different groups.
However, there are risks that need to be managed. Benefits are a fundamental part of the contract between employee and employer, and communications can create legally binding obligations. These affect participant communications in major corporate events such as a takeover of a listed company. Also, an employer has a duty to take reasonable care in giving advice or information to staff on benefits.
Employers must also take into account equality law, which means systems should be in place to communicate with absent staff and, at executive level, to justify different awards to staff at the same level.
Schemes, particularly larger ones involving administrators and trustees, also involve communications from parties with different legal relationships with employees and employer.
It is easy to see how, at the launch of a scheme, employers would take care in managing the information flow. Managing the flow over the life of the scheme, at the point an award matures or if an event occurs, might require more planning.