This article is supplied by Yorkshire Building Society Share Plans.
Employee share plans can be a mutually beneficial option for employers and employees alike, helping to achieve organisational citizenship. They are excellent value in engaging employees in the organisation and rewarding them for their contribution to business performance.
In a competitive world, organisations have to get the best out of their teams to continuously improve business performance. A strong remuneration and people strategy is a key component of success, and share plans can play a vital role in developing employee engagement.
But very little is known about the behaviours of share plans participants and what they do with their savings.
That’s why, with personal savings and share ownership being such a hot topic, we decided to take action and ask our customers. The aim of the research was to provide solid evidence that could be used to help other organisations, like Yorkshire Building Society, to improve share plan design, services and communications.
The research, which has been conducted by academics from the universities of Leeds and York in conjunction with Yorkshire Building Society, arose from a strong mutual interest in learning more about what matters to sharesave participants. The research was led by Andrew Pendleton, professor of human resource management at York, and Andrew Robinson, professor in accounting and finance at Leeds. Both are experts in share plans and have written widely on the topic.
The aim was to gain a greater understanding of the characteristics of sharesave participants, their behaviour while saving and beyond, the role of financial literacy in influencing decisions, and the relationship between sharesave and other savings and investments.
We were interested in the influences on key decisions made by sharesave participants, such as how much to save and what to do at maturity. As well as looking at characteristics such as age, gender and income, we also investigated the role of work colleagues and perceptions of share price trends in influencing decisions.
The research found that sharesave is a savings lifeline for some. More than one-third (39%) of participants save only in sharesave and make no other regular savings. Multi-savers, who make regular savings into other savings vehicles as well as their sharesave account, contribute 27%, on average, of their savings to sharesave. However, those saving only in sharesave contribute about £36 less per month, on average, than multi-savers.
This raises some challenging questions for government and employers. For example, would some employees save at all if sharesave was not there? And why do some employees engage with sharesave schemes rather than other savings vehicles?
Respondents gave a variety of reasons why participants save only in sharesave. For example, 72% say it is the easiest way to save, 70% say sharesave is less risky than most other savings plans, 59% cannot afford to save any more and 54% trust the administrator more than other financial institutions.
In terms of understanding and engaging an employee base, there is no magic answer, but working with employees to co-create an approach to help individuals increase their understanding of share plans and how these link with organisational citizenship is a good starting point.
So, will the all-employee share plan story end? Some have predicted the death of sharesave. At Yorkshire Building Society, we disagree because we see the evidence from employers of sharesave’s overriding benefits to them and the possible opportunities for increasing individual income. For many, these opportunities would not be there without sharesave.
It is important for all organisations to understand how important sharesave is to their own workforce.
Jill Evans is head of YBS Share Plans, Yorkshire Building Society Share Plans