- However, this falls to 56% when looking at FTSE 250 companies
- Tax advantaged Share Incentive Plans (SIPs) provide National Insurance Contribution (NIC) savings to both employers and employees
There are different types of employee share plans companies can consider using, however, the invaluable NIC savings of all-employee SIPs should not be underestimated. The most recent Government statistics(1) really demonstrate the level of financial benefits with a combined annual tax and NIC cost to the Exchequer being an impressive £290 million (NIC savings alone being £120 million).
Industry figures show that whilst 66% of companies in the FTSE 100 have already set up a SIP(2), this falls to 56% when looking at companies in the FTSE 250 (56%).
As a result, whilst two-thirds of the biggest companies in the UK are reaping the rewards of SIPs – including the positive impact of an aligned shareholder workforce and hundreds of thousands of pounds in NIC savings – nearly half of companies in the FTSE 250 could be missing out on these advantages.
A SIP is a tax-advantaged share plan which provides employees and employers with income tax and NIC savings. The Partnership Shares element of SIP is offered to all qualifying employees and allows participants to invest up to £1,800 in shares annually. As deductions are taken direct from gross pay, there are financial benefits to employees through income tax and NIC savings, as well as to the employer with 13.8% NIC savings.
The average contribution to Partnership Shares is around £80 per month. Analysis from Equiniti shows that with 500 employees participating, annual NIC savings to a company would be around £55,000; with higher take up rates, cost-savings can soar to hundreds of thousands of pounds.
In addition to these direct tax benefits, the UK Employee Ownership Index(3) highlights that businesses listed on the London Stock Exchange with 3% or more of their issued share capital held by or for the benefit of their employees perform better than those that do not.
Rebased from the end of 2002, those with more than 3% employee ownership reached an Index value of 912 by the end of H1 2016, compared to 296 recorded by the FTSE All-Share, an outperformance of more than 300%.
Graham Bull, Head of all Employee Share Plans at Equiniti says: "Share Incentive Plans are a great way to encourage employees to save and invest in shares. Not only are there valuable tax breaks, share ownership is a powerful means to align the interests of colleagues with those of investors, and to create real energy and excitement around business performance and prospects."
For more information:
Notes to Editor:
(1): HMRC NIC relief figures: https://www.gov.uk/government/statistics/table-61-estimated-costs-of-income-tax-and-nics-relief
(2): ProShare survey published May 2017: ProShare is a membership organisation; members receive a free copy of the survey, amongst many other benefits of membership (www.proshare.org)
(3): UK Employee Ownership Index: http://www.employeeownershipindex.co.uk/wiki/index.php5?title=The_Employee_Ownership_Index
Equiniti is a specialist outsourcer delivering technology-enabled solutions to some of the best-known brands and public-sector organisations in the UK, including c.70 of the companies in the FTSE 100.
It is the UK’s leading provider of share registration, employee share plans, and associated investor services, and also has market leading positions in pension administration and software, and employee benefit schemes.
Equiniti’s services, which are delivered by over 4,300 employees, benefit 28 million people in the UK and 120 countries around the world.