A law firm in Huddersfield says more of its client companies are offering shares to their employees – and seeing business grow as a result.
Baxter Caulfield said the manner in which firms were offering shares differed from the Shares for Rights Scheme, which came into effect this month.
HM Revenue & Customs-approved Company Share Option Plans enable a firm to grant share options to selected executive directors and employees over shares with a maximum value of £30,000 at the time of the grant. The board of directors has discretion to choose which employees or directors can participate in a CSOP and only those working at least 25 hours a week are eligible.
More typical practice in the experience of Baxter Caulfield, is the use of share options granted under the Enterprise Management Incentives Scheme.
This allows the granting of tax advantageous fixed price share options to key employees with a duration of up to 10 years, often triggered by a sale of the business.
Further incentives can be provided by use of a Growth Share Scheme, which offers immediate share ownership with the promise of capital return should the value of the business increase.
Employee share ownership share options have been found to boost employee loyalty and research by the University of Bradford found that equity incentives helped lift productivity by about 25%.
HMRC itself points to a “clear link between employee share ownership and improvements in productivity”.
Baxter Caulfield, which recently reported an additional £100,000 worth of new transactional work in terms of fees over the second quarter of this year, says that its findings tie in with recent statements at a governmental level.
Employment Relations and Consumer Minister Jo Swinson said: “Evidence shows that employee-owned companies can be more profitable, create more jobs and were more resilient during the economic downturn.
“We are committed to making direct employee ownership more attractive, cutting red tape for companies and promoting new and more responsible ways of running a business.”
Stephen Newman, a partner and company law expert at Baxter Caulfield, said: “We have set up a number of employee share schemes in recent months.
“These companies are performing well and although obviously not the whole story, satisfied employees with a real incentive to achieve business growth are having a positive impact.
“Share schemes are not limited to certain sectors, but can be embraced by almost any private limited company.”
Said Mr Newman: “These schemes are distinct from the Shares for Rights scheme which came into effect on September 1. Employees do not have to lose their protection from unfair dismissal and rights to redundancy pay and flexible working as the price of share ownership”.