Employee participation in share ownership schemes has plummeted to a 16-year low, says UHY Hacker Young, the Birmingham accountancy firm.
The number of UK employees to whom options were granted under the save as you earn (SAYE) share option scheme was 520,000 in 2007-08, the lowest figure since 1993-94. It is now 60 per cent lower than the 2001-02 peak when SAYE option shares were granted to 1.3 million employees.
UHY Hacker Young said that this dramatic decline was of great concern, as broader employee share ownership is generally recognised as positive for the UK economy.
Partner Malcolm Winston said: “If the Government really wants to follow through on its professed commitment to employee ownership share schemes, then it needs to stop HMRC reducing their attractiveness.”
“Over the last 12 months, HMRC has consistently cut the interest rate (bonus rate) on the accounts employees pay their savings into.”
Save as you earn (SAYE) share option schemes enable businesses to offer employees an option to buy shares in the company without having to pay income tax or National Insurance on their option gains. The price of the shares is fixed at the outset and a discount of up to 20 per cent off the market price of the share may be applied.
The employee pays a fixed amount of money into a special account every month for three or five years which is then used to pay for the shares.
If, at the end of the scheme, the employee decides not to exercise their option to buy the shares they get their money back, with tax-free interest if they have saved for at least a year. Benefits of SAYE option schemes include employee motivation, aligning employees’ interests with those of shareholders, recruiting and retain key employees, and reducing staff turnover
Mr Winston added: “The stock market crash caused by the dot-com bubble burst in 2001 was a serious set back for the SAYE campaign. Perversely, it is precisely when the market is doing badly that employees should take advantage of low share prices, but having SAYE share option accounts with such low interest rates hardly helps to sell the concept to employees.”