A Labour MP has introduced a bill that would reform employee share ownership schemes to allow preferential access to low-income workers and the opportunity for gig workers to join.
The draft legislation, introduced by Sir George Howarth under the Ten Minute Rule yesterday (8 November), calls for a number of changes to current employee scheme ownership scheme rules.
This would include updating two schemes – the share incentive plan, known as SIP, and the save-as-you-earn (SAYE) system, also known as Sharesave – and introducing a third scheme for low-paid workers.
Share ownership scheme membership has been falling in recent years, according to the MP. In 2021 only 260 organisations offered a new SAYE scheme, down from 340 in 2007. Overall, employees were awarded or purchased shares in 400 companies, compared with 570 in 2011-12.
He said that current share scheme arrangements do not reflect modern employment practices. He said the five-year minimum investment period is no longer realistic as many people do not stay in a role for that length of time, and that it would be reduced to three years if the bill is taken forward.
Employee share ownership
Sir George noted that current share ownership plans are only available to pay-as-you-earn employees, but the bill would create a new plan that does not depend on regular monthly contributions. This would be more accessible to those who work in the gig economy or in less regular forms of work, he said.
“It would enable employers to give a free share award to their employees, to be held for a year, after which it could be realised at a discount value, as in SAYE schemes currently. That would be attractive to younger staff, who may not envisage staying at a company for three years, let alone five,” he said.
The bill, which has gained support from 12 MPs from across the political spectrum, would also introduce a provision to require the Treasury to carry out a consultation with the aim of modernising employee share ownership.
He highlighted the benefits that share ownership schemes have for both employees and employers.
“Pets at Home staff – mainly shop floor staff working in retail – who participated in the company’s SAYE scheme have made an average gain of £21,000.That is a healthy return on their investment and an increase in their financial resilience,” he said.
“As the CBI and the Social Market Foundation pointed out, employees having a stake in the company they work for provides important productivity gains, as well as boosting innovation and corporate long-termism.”
The draft legislation has been welcomed by employee share scheme representative body ProShare. Its head of external affairs, David Mortimer, said: “The case for updating and modernising all-employee schemes is now stronger than ever to help employees build their financial resilience in difficult economic times.
“One of the most important benefits of all-employee share plans, particularly mindful of the cost-of-living crisis, is the enhanced financial resilience for plan participants. Our annual survey, issued in August, established that the weighted average value of a SIP participant’s holding is a healthy £10,294.”