ProShare has welcomed the Chancellor’s review of the Company Share Option Plan (CSOP) but advocates for a comprehensive assessment of all tax-advantaged employee share arrangements, rather than the ‘piecemeal’ approach outlined.
The government announced a review of the Enterprise Management Incentive (EMI) scheme in Budget 2020 to guarantee that it would continue to encourage high-growth businesses. The government’s conclusions in the Spring Statement reveal that the review is now complete and that the present EMI programme will continue in place. The Spring statement, on the other hand, stated, “The scope of the review will be widened to include whether the Company Share Option Plan (CSOP), another discretionary tax-advantaged share scheme, should be changed to let enterprises grow beyond the scope of EMI.”
The multiple benefits afforded by all-employee share programmes, including lower absenteeism rates and greater worker morale, have been highlighted in a recent study. According to an Oxera report prepared for HM Revenue & Customs, where a SAYE is in place, an organisation’s productivity improves by 4.1 per cent over time. According to the research, production increases by 4.4 per cent when both a SAYE and a CSOP are in place.
A ProShare funded report from the Social Market Foundation in 2021, titled “A stake in success: Re-imagining employee share plans for the 2020s,” showed that employees who participate in ESO plans are much better off than non-participants in the same salary category. For individuals in the lowest income quartile, the ’employee share-ownership premium’ – defined as the median net financial wealth of employee shareholder households vs non-shareholder households – is an average of £10,900.
ProShare head Murray Tompsett says: “While some will doubtless be disappointed there are no immediate plans to extend the Enterprise Management Incentive, there’s a real opportunity here for a review and a refresh of Company Share Option Plans, updating them to ensure they support companies as they outgrow the parameters of EMI.
“Given that the £30,000 limit for CSOPs has been unchanged since they were established 27 years ago, we at ProShare say, ‘About time too!’ But why end the review at discretionary tax-advantaged share schemes which are, after all, a minority interest? The two key, all-employee tax-advantaged share schemes – Save As You Earn (SAYE) and the Share Incentive Plan (SIP) – have well over one and a half million participants and require urgent updating if they are to continue to bring tangible benefits to both the employee and the employer.”
Tompsett added: “Increasing employees’ financial independence and decreasing reliance on the state has never seemed like such a sensible solution. The principle of employee ownership is one of cross-party consensus; employee share plans have quietly worked to support employees and businesses for more than 40 years.
“It is sensible for the government to consider how the suite of ESO opportunities open to companies can work together to promote the benefit of employee ownership. But by reviewing these plans in a piecemeal manner, we risk allowing these key plans – open to all employees on equal terms – being left behind and atrophying.
“The Chancellor has missed a trick by not considering all-employee share plans as part of this extended review. In our response to the call for evidence on EMIs, ProShare called for such a review and gave some examples of steps that could be taken to develop a range of employee share ownership opportunities fit for modern employment trends. We will continue to push for long-overdue reforms.”