As part of the build up to September’s Employer Branding Summit, HRreview features a piece by David Kilmartin, Head of Business Development, Capita Registrars which – among other topics – considers how businesses will attract employees in the future:
It is true that companies have to find different ways to attract the best recruits and also find new ways to engage existing employees. Where it may not be possible to offer higher salaries, companies can look to offer other types of benefits to make a career at the organisation a desirable option. Share schemes can be attractive to prospective and current employees and one of the most advantageous is the ‘Save as You Earn’ (SAYE) scheme.
A SAYE scheme is designed to allow employees to save to buy shares in the company they work for, at up to a 20% discount on the market value – the discount is at the discretion of the company. Essentially it is a risk free way to save where at the end of your fixed term you can have your money back or benefit from any increase in the share price. If your company is performing well this could be an attractive prospect to employees – current or prospective.
If the share price is unlikely to increase, participants are still able to benefit from tax free interest (if their plan is for five or seven years) on their savings. Admittedly, the interest is probably not enough to be a draw in itself and those who only sign up for a three year plan are no longer eligible to receive interest. However, one of the most fundamental benefits of the SAYE scheme is that it is risk free, you may not be guaranteed astronomical returns but you will at least get back what you put in. Indeed the Financial Services Compensation Scheme has in the past provided that money invested in SAYE schemes is guaranteed even if the bank it is deposited in goes bust, up to the per person limit of Ã‚Â£50,000.
For the employer company there are the benefits of being able to treat the scheme as an expense for corporation tax purposes. Crucially SAYE schemes are also a way to engage existing employees. This is especially true for very large organisations where the corporate world can seem remote and distant to many employees. SAYE schemes are available to eligible employees within an organisation and so can be one of the ways to foster a sense of inclusion and understanding of the financial performance of the company. Eligible employees are determined by the scheme rules and sometimes the length of service of the individual.
It has also been said that involving employees in share schemes can motivate them and get them interested in the success of the company – after all, they stand to gain if the organisation is performing well. Another potential advantage of having employees that are also shareholders is that it is easier for the company to gain an understanding of a sometimes significant part of its shareholder base. This enables companies to ascertain the best way to target a potentially large portion of shareholders and gauge their opinions on key issues and possibly even make communication and cooperation easier to manage.
In this competitive market, it is not only about attracting the best people, but also about retaining them. Helping to cultivate a sense of commitment to the organisation is crucial to keeping hold of skilled individuals. A sense of ownership in the company is an important part of feeling committed and having a stake in the financial success of the organisation will help to develop loyalty and financial interest. So if the retention of employees is an issue for organisations, encouraging participation in SAYE schemes may be beneficial – much of the benefit to be gained from SAYE schemes is time related so in order to realise the full benefit, employees may be more inclined to remain with the company.
It is fair to say that there are advantages on both the side of the employee and employer for participation in share schemes. However, there are some administration costs for the employer company and the costs of communication of material associated with the scheme. These are very important elements of any stakeholder engagement programme and can be easily kept under control if planned for and managed correctly, typically by utilising e-communication solutions to communicate in a way that is faster, more efficient and also more environmentally friendly.
Today companies are spending less on shareholder and employee communication by using e-communications but are becoming significantly more effective by using company intranets, internet, telephone applications and e-mail. Companies can use e-communication solutions to engage employees and create forums whereby employees can ask questions and make suggestions about the share schemes. This can lead to increased take up and greater enthusiasm and participation in corporate activities. Using emails or updates on a company intranet to provide information about share price or how much employee savings are now worth will incentivise others to take part and is also likely to motivate the employee.
An organisations’ key resource is its people and so it is crucial that the relationship between the company and its employees is good. Good communication is key but it is also important that companies encourage the take up of incentive schemes like SAYE schemes. This will cultivate interest in the company and promote a sense of participation. Good management of SAYE schemes and the communications associated with them will help to maintain a feeling of loyalty among employees and enable a company to retain good employees for as long as possible.
David Kilmartin, head of business development, Capita Registrars