Purpose Coalition - How All Employee Share Plans Can Empower Workers

A recent report by the Resolution Foundation highlights the financial vulnerability faced by many Britons, with over 11 million working-age individuals having less than £1,000 in savings¹.

This financial fragility underscores the importance of initiatives that encourage saving and investment for the medium term, to help build financial resilience and wealth creation amid ongoing economic pressures.

Employee share ownership plans in their current form have been consistently helping millions of British workers to save and invest ever since their launch in the 1980s and 2000s. These proven vehicles are ready to support today’s workers to build financial resilience.

Equiniti has administered employee share plans for over 40 years and in that time has seen millions of employees from both listed and private companies, and across all sectors, benefit from receiving shares from their employers.

The plans give employees a stake in the company they work in, enabling them to benefit directly from growth in their company, often driven by the wider economy, and helping them connect with the purpose and mission of the company.

They feel better able to invest and build their skills, career and savings over the medium to long-term. Crucially, employee share plans are shown to act as a stepping stone to personal investment and improved financial education. EQ’s research² shows that once employees own shares via their employee share plan, they are more likely to invest in a wider range of companies, building their resilience.

Over the past few years, Equiniti has seen a large increase in the number of employees transferring their shares into Individual Savings Accounts as part of their medium-term financial plans. This works alongside pension scheme contributions, which are looking to the long term.

These schemes have been firmly supported cross-party³ and current employee plans include Enterprise Management Incentives (EMI), Company Share Option Plans (CSOP), Save As You Earn (SAYE or Sharesave) and Share Incentive Plans (SIP). With the employing company responsible for their administration and deductions direct from pay, employees find these plans easy to use and keep using.

Despite their benefits, on average less than 40% of eligible employees participate in contributory share plans⁴. In 2023, HM Treasury launched a call for evidence on SAYE and SIP, asking stakeholders to consider opportunities to improve and simplify the two plans.

Research shows a key reason for non-participation is the length of time before full tax advantages are realised, with many employees, particularly younger employees, believing the period too long for them to benefit⁵.

With SIP it would increase adoption, particularly for lower paid employees and those with shorter employment horizons, if the tax-free period reduced from five to two years.

For SAYE it would increase overall investment and keep capital in the UK stock market if all leavers are able to use their savings to buy shares rather than just receiving back their savings.

These changes would firmly support workers to participate in growth and would reflect modern trends in job tenure.

A central consideration, especially with the cost of living, is affordability

As an optional feature for companies who work hard to support their employees, a choice for employers to make an SAYE ‘Company Contribution’ towards employees’ overall monthly savings could bridge affordability. Additionally, where this is offered, the company could then choose to auto enrol all eligible employees, transforming participation as happened with pension enrolment. This proposal would break down barriers to investment, giving all employees (regardless of personal income) an opportunity to participate.

We already work with private market providers, though welcome the Government’s support of the Private Intermittent Securities and Capital Exchange System (PISCES).

By including employee shareholders, this enables them to benefit from the sale or refinancing of a company, allowing them to benefit from PISCES.

Combining that with the savings and investment opportunities with changes to broad based tax advantaged share plans, provides a stepping stone to the growth in investment, further employee engagement and sharing of wealth creation amongst workers across all levels of public and private companies.