Half of SAYE share schemes fail to deliver profit for staff
Official government figures cast doubt on the value ofoffering share schemes to employees.Personnel Today has learned that statistics collated by theInland Revenue show that in around 50 per cent of schemes employees would notbenefit immediately from exercising the option to buy company stock insave-as-you-earn share schemes. Under SAYE schemes employees have the option to buy sharesafter a specified period at a price set when they entered the scheme, orconvert their savings to cash.But the IR’s figures are understood to show that half ofschemes are “underwater”, where shares are worth less than at the start of theSAYE scheme.This is mainly the result of falling share prices amongblue-chip companies, but it also highlights a significant weakness of schemesas an employee benefit.The poor performance of SAYE schemes will also raise fearsover the viability of Gordon Brown’s plans for widespread employee shareownership.The Chancellor wants to develop more all-employee share schemesand in March’s Budget he announced lower Capital Gains Tax to encourageparticipants. But these schemes do not have the safety net in SAYE schemes andif their success followed the pattern of SAYE performance, half of allparticipants would lose money.In the US employees in a similar scheme run by food giantKellogg have seen life savings plummet in value with a 45 per cent decline inthe stock price since last year.A survey by the independent company ProShare last Novemberfound 25 per cent of company schemes underwater, but Sally Russell, head ofemployee share ownership at ProShare, said the revenue’s figures will be moreaccurate because all companies are required to submit data.Just over 300 firms took part in the ProShare survey, whilethe Inland Revenue figure is based on returns from all the 1,200 companiestaking part in the scheme.Every participant has to declare the option price and themarket price to the Inland Revenue at the end of the financial year.Mark Childs, vice-president of compensation and benefits atFidelity, advised companies to be cautious.“I am aware of a lot of old-economy share schemes beingunder water – particularly in banking, retail, consumer products andengineering. Companies need to recognise that a lot of their employees cannotafford to take the risk associated with single-company investment”. Comments are closed. Related posts:No related photos.
Half of SAYE share schemes fail to deliver profit for staffOn 11 Apr 2000 in Personnel Today Previous Article Next Article