open navigation close navigation Menu


Employee Share Plans: Encouraging Further Engagement

Employee equity schemes are increasingly important in securing and retaining talent in many sectors in the UK and US, but uptake in voluntary schemes can still be enhanced in both countries.


According to EQ’s Shareholder Voice research, companies need to intensify employees’ financial education and raise awareness about their equity ownership benefits to boost participation and promote engagement.

In 2020, there were over 15,000 tax-advantaged employee share schemes in the UK – 6% more than in 2019 and 77% above 2010’s plans. However, according to a recent study by SMF, 38% of employees declined to join share schemes because they couldn’t afford it.

In the US, just over half of companies offered stock purchase plans to employees, according to a 2020 Deloitte survey. A further 21% are considering setting up a scheme. Yet, in most companies, less than half of eligible staff participated.

Satisfaction among stock owners also reflects a generational shift in attitudes toward employment. According to EQ’s survey, 85% of employee shareholders were positive about the experience and 75% said they would buy shares in other companies. But these figures are significantly higher among baby boomers than Gen Z employee shareholders in the UK and the US.


of employee shareholders are positive about their experience


would buy shares in other companies

First, let’s look at why employees are positive about their schemes.

EQ’s research shows, for employees working for companies whose shares are publicly traded, 65% chose to buy shares to boost their wealth and 38% because they thought the share price would rise in the next 12 months. 83% check the share price at least once a month, and 50% feel the employer has a high responsibility to communicate the company’s financial performance with them. 

A further 21% opted into their employer’s scheme because they believe in the company’s goals, and 10% feel they have influence over their company’s performance.

Encouraging Further Engagement

However, changes in employee-employer relationships in recent decades call for a different approach to help schemes stay relevant, says David Ellis, consultant at David Ellis Associates.

Gen Zs and millennials are now the dominant generations in the workforce, but they tend to stay with the same employers for a shorter period compared to baby boomers. Employees should be able to share in the company’s success through the equity they receive, but not be penalised with the loss of that equity if they leave, says Ellis.

UK schemes offering the option to buy shares after five years of employment, for instance, have become less effective in light of higher personnel turnover. By contrast, many US plans are starting to offer share ownership earlier in an employee’s tenure with the company.

UK employers will have to offer shares soon after hiring and allow employees to buy them frequently to help reduce the risk of stock market volatility, says Ellis.

“Explaining and communicating clearly how these factors work is also critical to maximising take-up,” he says. “The most sophisticated schemes will also use slick digital systems to ease the experience, and explain how they fit into the employee’s long-term financial plan.”

The tax advantages of share schemes are substantial and make the plans much more attractive. But those advantages may be lost on employees if companies fail to provide education and guidance on stock ownership.

Another trend schemes need to keep up with is the rise in gig workers, zero-hours contracts, and other workers in a less formal relationship with the company, says Liz Pierson, a partner at Deloitte.

“In the UK, current laws make it difficult to invite them into your schemes, but they are a valuable part of the workforce, so companies might want to include them,” she says. “This area has been getting some attention and, although it will be complex, the authorities might consider changing the definition of who can join.”


Supporting Financial Wellbeing

Companies wishing to attract their employees to share plans can choose various strategies.

“A good way to kick start ownership is with a free shares award, then use partnership and matching plans to build on that,” says Jennifer Rudman, industry director, employee share plans, at EQ. “This helps attract new joiners as well as boost [employee] retention.”

Another path could be introducing auto-enrolment in stock purchases in the same way the UK has with pensions – because “once placed in the plans, people tend to stick with their shares,” says Graham Bull, EQ’s head of all employee share plans. Employees can always opt out if they don’t want to join for any reason.

Jim Wulforst, executive vice president, head of equity compensation services at EQ, says one reason take-up in US stock purchase plans varies significantly between companies is the different quality of their communications.

“We see 70% participation in some companies and 20% in others,” he says. “Some companies have staff and resources dedicated to promoting share ownership plans but many don’t.

“Generally, companies need to do more on promotion, communication and education of the plan, especially in sectors where the employees may not be tech-savvy, such as manufacturing.”

Digital communication plays a key role in boosting participation, as technology tools can allow an employee to easily access information about their shares, as well as details about the company’s performance, Wulforst adds.

“This can work particularly well with IPOs, where communication can start at least a year ahead of the float,” he says. “Employees can learn that if they are still working for a company when it lists, they will get a certain number of shares.”

However, any pre-IPO plan requires careful planning and clear warnings regarding, for instance, the fact that IPOs sometimes do not go ahead and that the share price might fall as well as rise at listing.

Maturity Options

According to the EQ survey, employees feel existing communication tools are effective in keeping them informed about share ownership, but they also consider their employers responsible for providing education about their investments.

Most track the stock price at least once a month, which suggests share plans are effective at increasing overall employee engagement with the company, says Rudman

But Ian Cox, managing director, share plan services at EQ, suggests companies could offer more options on maturity such as individual savings accounts (ISAs), and combine that with advice about financial wellbeing. This way, the scheme would become a stepping stone to wider share ownership, helping employees build cash resilience, reduce debt and diversify savings.

This chimes with research by SMF suggesting employee share ownership could bolster the financial resilience of workers.

“Companies can do more to educate members about corporate performance and about maturity,” says Cox. “If you give them opportunities to learn, grow and earn through a share plan, you’re more likely to keep them. But you need to get the message right.”

Pierson, from Deloitte, says companies are moving in the right direction on communication. “Over recent years, we have seen much better communication about share plans,” she says. “That reflects a shift in the way these schemes are used. They are less about another reward, more about engagement and getting employees involved in company strategy. With a global or diverse workforce, it’s a way to make you feel part of one organisation.”

EQ is the UK’s leading share registrar and employee share plans provider. We handle multi-billion pound corporate actions and support new companies making their debut as a listed company.