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Employee share schemes fostering shared goals

Posted on December 08, 2010

The Chartered Institute of Personnel and Development (CIPD) has published a report this week which investigates the relationship between an organisation's perceived purpose and the morale and effectiveness of the employees in relation to this. The CIPD in fact refer to a shared sense of purpose as a golden thread around which all other strategy should be based. Just how true is that assertion, and what can be done to ensure that the entire organisation is working to the same goal?

The report seems to suggest that the less an employee is aware of the company's main purpose then the less emotionally motivated they are by their job. Of those working in the private sector, 59% of people asked felt that the main purpose of their organisation is to make the most profits for investors and owners, the major issue with this view is that for all the employees who are not owners, there is little perceivable benefit to them in the success of the company. It is therefore crucial that the employees are motivated by another means to prevent a loss of interest and commitment to their job which can in turn seriously hinder the company's performance.

A highly successful method of achieving such motivation is through the use of an all-employee share scheme, such as a Share Incentive Plan (SIP) which allows employees to become shareholders in their company. In this way the purpose of the business, and its success, quickly come into sharper focus. When employees can see the importance of their work to the company, and accordingly the financial benefit this can bring, there is a far greater incentive to make the company a success.

One in 6 of the participants felt that their job was just a job. By allowing employees to hold a stake in the Company this attitude can be defeated as employees become part of the company in a very tangible way.

By way of illustration a SIP permits employees to save a proportion of their salaries to purchase shares in the company (up to 1,500 worth of shares per year). The deduction is taken from gross pay before tax and NICs, thus reducing substantially the employee's cost of acquiring the shares. In addition to this, the company may grant matching shares up to twice the value of those purchased (therefore a maximum of £3,000 worth), and free shares up to the value of 3,000 may be gifted in a year to the employee. It is therefore possible for an employee to gain up to £7,500 worth of shares each year in the company, an exceptional way of making employees mindful of their company's performance.

Whatever the size of an organisation is, it makes sense to ensure that the employees (often a company's most important asset) are motivated, emotionally engaged and aware of the importance of their role. Introducing a share scheme may be just the incentive needed.

To discuss anything in this article further, or for more information on employee share schemes and how they could help your business, please call us on 020 8949 5522 and ask to speak to any one of our advisors.

 
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