The Capita Share Plan survey

Transcription

1 The Capita Share Plan survey

2 The Capita Share Plan survey Employee share plans are the most widespread form of employee ownership and over 2 million employees in the UK hold shares or options through such plans. In (the most recent period for HMRC statistics 1 ), the total value of shares and options awarded was around 3.45 billion, 21% higher than in Employee share plans could be seen as merely a way of providing additional remuneration to employees. However, if employees have a stake in the shares of the company they can be a means of bringing: Improved productivity and performance of the business Increased job satisfaction and employee engagement Reduced absenteeism Have a positive effect on staff retention Help with recruitment 1 HMRC Employee Share Schemes Statistics for

3 Employee share plan trends On the following pages we take a look at the trends demonstrated by statistics gathered over the last three years from Capita s employee share plan operations in support of our clients and their employees in the administration of UK tax-advantaged Save As You Earn (SAYE) and Share Incentive Plans (SIP). References are to the plans administered by Capita Share Plan Services on behalf of our client companies. SAYE is an all-employee share SAYE option plan. The plan allows a company to give employees the right ( option ) to buy shares in the company at an exercise price that is fixed when the option is granted. The exercise price must not be less than 80 per cent of the market value of the underlying shares at that time. Participating employees can save between 5 and 500 per month under a SAYE savings contract. These contracts last for three or five years. The savings and any interest (as applicable) can be used to buy the shares if the employee chooses to exercise their options after three or five years, depending on the terms of the contract. Employees are not obliged to exercise their options and they may not choose to do so, particularly if the current share price is less than the exercise price set when the option was granted. If the option is not exercised, the employee receives the proceeds of the SAYE savings contract including the bonus or interest. The SIP is an all-employee share SIP gifting and share purchase plan. Employers can match contributions with Matching shares. The plan has three key elements: Partnership shares employees can buy up to 1,800 of shares out of pre-tax and National Insurance earnings; Matching shares employers can give up to 2 free shares for each Partnership share bought by the employee; Free shares employers can give employees up to 3,600 worth of shares each year. Some SIPs offer the opportunity to use dividends paid on shares held to be reinvested tax-free in further shares (Dividend shares). All shares are held in trust on behalf of employees. When an employee leaves, all their shares come out of the plan. Employees do not pay income tax or National Insurance Contributions on the value of the free or Matching shares given to them provided they keep them in the plan for at least five years. If they take them out of the plan within three years, income tax and National Insurance is payable on the market value of the shares at the time the employee takes them out. Finally, if shares are withdrawn between three and five years after the award date, income tax is paid on the lower of the market value of the shares on the award date or the withdrawal date. 3

4 Keeping the faith in difficult times Some might say that the popularity of employee share plans is surprising particularly against the backdrop of difficult economic and trading conditions for many companies in the last few years. The statistics seem to demonstrate that employees and employers have kept faith with and continue to recognise the value such plans can bring. Improvements in communication about the plans and accessibility online have also played a part. SAYE statistics Number of companies for whom Capita administers SAYE plans up 60% Number of SAYE accounts administered up 51% Average monthly savings per employee up 26% to 146 Employees saved and invested an additional 79 million in 2015 compared to 2013 up 91% Number of new SAYE grants made up 15% SAYE savings and investments grew at rates in excess of the increase in the number of client company plans administered by Capita. 4

5 SIP statistics The number of employees eligible for SIP up 20% The number of participants in SIP up 10% Regularity of free share awards the most popular is once a year at 38% The average award value of free shares has increased by 212% to 1,571 85% of clients offer Partnership shares 57% offer Matching shares The number of companies offering Partnership shares up 24% and those offering Matching shares up 17% Employee Partnership share monthly contributions have remained stable over the period The use of free share awards and Matching shares is seen as a particularly effective way of companies showing that they value their employees and want to retain them. It s also an effective method for newly listed companies to reward their employees. The trends identified above amongst our client companies are reflected in the HMRC national statistics 1 for SAYE and SIP which indicate that awards made under SAYE rose for compared to with more employees being granted options and also the initial value of shares over which options are granted rising. For SIP the number of employees awarded free shares and the value of these shares increased in This was in some part because of isolated, one-off changes among some of the larger SIP plans in and The estimated costs of relief for income tax and national insurance contributions approximately doubled in This increase is again mainly attributable to the increased number of employees receiving free shares and the total increase in value of these shares. 1 See note 1. 5

6 Pushing for change and flexibility to maintain popularity Recent lobbying by the share plan industry has helped to maintain the attractiveness of share plans to employers and their staff for example in 2014 the maximum amount that could be saved via SAYE increased from 250 per month to 500 and in SIP, the amounts that could be awarded to employees or purchased by them increased from 3,000 to 3,600 and the maximum investment by employees changed from 1,500 to 1,800. The Nuttall Review commissioned by the Department for Business, Innovation and Skills (BIS) in 2012 was an independent review for BIS, by Graeme Nuttall, on employee ownership. It looked at the obstacles to promoting employee owned companies, set out a framework for removing them and made recommendations to Government on how to promote employee ownership. In addition, Capita and the share plan industry has worked with the Office of Tax Simplification on the review of tax advantaged and non-tax advantaged employee share plans to simplify legislation and therefore the operation of such plans. Online applications have increased take-up In practice, there are a number initiatives and changes that have encouraged share plan participation. For example, share plan industry efforts to streamline plans and facilitating applications via telephone and online has helped to promote take-up and make information about the plans more accessible. SAYE Online SAYE applications by employees up 53% in 2015 compared to Online application facilities offered by 97% of client companies in SIP Online SIP applications by employees up 19% in 2015 compared to Online application facilities offered by 40% of companies in 2015 compared to 33% in % of companies offered online access to SIP holding information in 2015 compared to 52% in

7 Flexibility is key for issuers Being able to participate in one of these share plans as soon as you join a company and purchase shares at a discount to the market value of up to 20% in an SAYE plan or tax free via a SIP is an attractive incentive to join a plan. In addition, as mentioned above 2014 saw changes to both SAYE and SIP (in terms of savings and investment amounts) designed to maintain the popularity of the plans and give employers flexibility in the way they operate them. SAYE 74% of companies use the full 20% discount. SIP 22% of companies cap the maximum value of Partnership shares at 1,500, 73% cap at 1,800. Eligibility almost 76% either have no service period or a minimum period of 1 to 3 months. In terms of the Matching shares offered by companies - the most popular Matching basis is 1 for 1 (30% of clients), tiered Matching depending on number or value of shares (23%) and 2 for 1 (16%). Eligibility for free shares 44% of clients do not require any service period. Conclusion We wholeheartedly support the use of employee share plans - employers providing employees with a means of building up a share of ownership of the company they work for in a way that is often financially advantageous to both parties but then we would say that as here at Capita we provide employee share plan administration services to over 200 companies and 400,000 eligible employees. Our business continues to grow reflected by the general popularity of employee share plans with employers. The trends identified within our client company activity and nationally are indicative of gradual growth over the last three years for both SAYE and SIP. On average, savings and investment values are increasing and eligibility within the workforces is expanding. There are always one-off changes that can skew statistics and, whilst economic uncertainty is still a fact of life, changes introduced for savings and investment within these plans has been favourable. The savings culture is increasingly well embedded in the business infrastructure of the UK economy. Phil Kershaw Senior Manager - Industry & New products May

8 If you would like more information about employee share plans or you would like to talk about employee share plans for your business please contact: Simon Stafford Associate Director Shareholder solutions - Capita Asset Services t: +44 (0) e: simon.stafford@capita.co.uk Viviane Joynes Head of Industry Capita Asset Services t: +44 (0) e: viviane.joynes@capita.co.uk SS15437