Ask most MPs what an employee share ownership plan is, and most will venture a decent guess, but the majority won’t know. There is little knowledge of how the schemes work, how widespread they are or the benefits they can deliver for both companies and employees. I believe this lack of awareness is holding back much-needed scheme reform.
More than 1.3 million staff (an average of 2,000 people per UK constituency) invest or save in the UK’s two ‘all-employee’ share plans. But participation rates are falling because schemes are no longer keeping up with changes in work patterns, for example, there is a more transient workforce with fewer people remaining with one employer for their working life. With the Chancellor’s recent commitment to make investing in stocks and shares more accessible, now is the perfect time to introduce some simple reforms to employee share ownership plans at the upcoming Budget, to drive up company and employee participation.
The two schemes which need reform are the Save As You Earn (SAYE) and the Share Incentive Plan (SIP). During the four decades since the SAYE was introduced and over 20 years since the SIP was brought in, these plans have benefitted tens of millions of employees. The productivity benefits for firms are also well-documented. It’s why the government offers tax benefits to staff and participating companies. It’s a simple but effective concept: companies, staff and the government all put a bit in and all get something back. A win-win-win.
Despite the benefits, another reason participation in both SAYE and SIP is falling, is due to their length and complexity in accessing these plans. In 2024, there were only 235 new company ‘grants’ for SAYE: excluding the pandemic this is the lowest figure ever measured by the share plan industry. Participation in SIP is also falling: there has been an 11% fall in weighted staff participation since 2020.
In her Mansion House speech, the Chancellor made it clear that she wants to see an increase in ordinary, often first-time, investors in the stock market. Greater investment in Employee Share Ownership plans would help achieve this.
Many businesses have called for one simple change: a reduction in the SIP length from five to two years to reflect modern employment patterns, especially for Gen-Zers. Two years ago, more than 40 firms including easyJet, Vodafone and National Grid wrote to the Treasury calling for this simple reform. The previous government chose to ignore these businesses. This Labour Government now has the ideal opportunity to grasp the nettle and revitalise employee ownership. Similarly, the SAYE gives staff the option of a five or three year term. The fact that 90% of participants opt for the 3-year term is a clear indication that longer scheme length is less attractive to employees.
As a Labour and Co-operative MP, these plans also chime with the Co-operative Party’s drive to increase employee ownership with a workforce that is more flexible and transient than in the past. Increasing worker equity has been shown to deliver higher productivity, better firm performance and greater job satisfaction for workers. Supporting worker ownership – through co-operatives, employee-owned businesses and all-worker share plans can strongly support inclusive growth which raises living standards and incomes – a vital mission of this Government.
The previous government launched a consultation in 2023 to look at SIP and SAYE reform. But no response was ever published. Officials may have devised other proposals to drive up participation - now is the time to dust off these ideas.
A few weeks ago, I hosted a Parliamentary roundtable to discuss this issue. I was delighted to hear that several MPs have directly benefited from participation, including my colleague, MP for Barrow and Furness, Michelle Scrogham. Michelle has lifelong experience of the benefits of company share plans with family taking part during time working at pharmaceutical giant GSK and BAE. She pointed out that the plan provided significant financial benefits and acted as a strong incentive to retain staff and boost the local economy. Michelle said:
“Share plans have always been a really useful way to save. I always remembered the buzz around the town when a plan matured, as every local business had a bumper couple of months and new cars would be spotted everywhere! It was shares that paid for my wedding, shares that paid for our home extension and shares that paid for a new kitchen and cars. It was such a no brainer to invest as much as you could afford and when my son began his apprenticeship, that was the advice we gave him too.
The incentive was for savings, but was also a drive for productivity as the whole workforce had a vested interest in the company doing well. Share prices were a regular conversation, especially around the time a plan was about to mature.”
With the Government’s ambitious agenda to support staff, back British business and encourage share investment, modernising employee share ownership plans has an essential role to play.
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Written by Kirsteen Sullivan MP, Member for Bathgate and Linlithgow