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Mind the [Generation] Gap: how share schemes can help

Posted on December 14, 2011

UK employers can no longer set a mandatory retirement age following the phasing out this year of the default retirement age, which enabled employers to force staff to retire at 65 years of age. This means fewer Baby-boomers are retiring when they should, creating succession planning challenges and an unwelcome delayed career progression for top management, which in turn can cause disengagement amongst that younger demographic.

The generations of employees working in your business all require a different approach to get them motivated. Shares schemes provide an attractive proposition for Baby-boomers and Generations X and Y.

Benefits of employee trusts

Baby-boomers are considering retirement and for many their financial provisions are inadequate. Those relying on a trade sale of their business to provide a lump sum boost to their retirement funds are now frustrated that such corporate transactions have stalled in the current economic climate as potential purchasers struggle to raise funds. An Employee Benefit Trust (EBT) can be of help here as a succession planning arrangement that provides a tax efficient exit for an existing shareholder and, in conjunction with an appropriate share plan, the transfer of ownership to upcoming management.

Generations X and Y

Generation X employees, (those between the ages of 33 and 46) are ambitious and want to progress their careers and increase their earnings. For this group expenses are growing, burdened down with mortgage and car payments, child care cost and education expenses. In addition, they are saddled with the reality of job insecurity and a struggling economy. Obviously, money is a concern for your Generation X employees. A share plan delivers the potential for a future cash sum that could, for example, make a meaningful mortgage repayment possible. It can also cement a promise of future ownership.

A survey by Equitini shows that Generation Y women working in media and travel & leisure with shares in their employer are the most loyal. Share plans are therefore an effective motivator and retention tool for the younger employee too. The Media and Travel & Leisure sectors have the highest levels of aggregated employee loyalty out of 17 industry sectors, the research reveals. Enterprise Management Incentives (EMI) are a popular component of the reward package in the media and technology industries where early adopter Generation Y employees are the talent pool sought.

Companies looking to attract young talent must recognise that the ambition of many workers now is not to be an employee but to be an entrepreneur for this demographic the key to successful engagement is fulfilling their desire for ownership.

Proven benefits

Offering employees shares in their employing company delivers ownership and is a proven way to boost loyalty and engagement with a positive correlation to improved productivity and profitability. The research is based on a study involving more than 1,350 employees working across 17 industry sectors in the UK covering a balanced representation of Britain's leading private sector companies.

The greatest loyalty boost is delivered by those aged between 41 and 50, who move from being the least loyal age group to the second most loyal after receiving some form of employee share plan. From an industry perspective the three sectors demonstrating the biggest jump in loyalty after staff take up an opportunity to buy shares are the Media, Food & Beverage and Automobiles & Parts sectors.

Interestingly the consensus view that Generation Ys (adults aged under 30) generally lack loyalty in the workplace and have a tendency to 'job hop' is dispelled somewhat by this research.

For information on succession planning or share plans as an incentive for your business contact the author Liz Hunter tel: 020 8949 5522 or any member of the RM2 team.

 
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