Share schemes are problematic for employers in the care sector

Figures indicate that the new employee shareholder arrangements are having a minimal effect throughout the business community including the care sector.

There is a feeling that this type of arrangement is not suitable for most care businesses and that in any event employees may not be interested or do not consider they can afford to participate in a scheme like this. However, the question has to be asked whether if care businesses ignore schemes of this sort, they are missing a potential benefit which may support increased business growth?

While it is difficult to provide a definitive answer, it is likely that many businesses in the sector see share schemes as complex, expensive to set up and burdensome to manage. Furthermore, businesses may see a dilution of equity as unwelcome and worry that increased employee participation may amount to unwelcome interference.

The Chancellor reiterated his commitment to employee share ownership in his Autumn Budget Statement. He announced further tax breaks for employees of companies that are indirectly employee-owned. For the first time in over a decade, there will be an increase in the maximum annual value of shares that an employee can acquire with tax advantages under Share Incentive Plans to £3,600 a year for ‘free’ shares and to £1,800 a year for ‘partnership’ shares. The ‘Save As You Earn’ savings contribution limit will also be doubled from £250 to £500.

So why have more employers in the care sector not rushed to embrace employee ownership? Employee engagement in the care sector is considered to be an important element of a successful business so whilst initial feedback suggests schemes are considered to be overcomplicated and employees may be nervous about giving up some of their employment rights for shares, might it be worth care providers taking another look?

Creating and running employee share ownership structures can be complex and will require full consideration of overall corporate structure, share ownership and tax position. It also creates an additional administrative burden for the business, particularly where there is a higher turnover of staff as can be the case in the care sector. However, research by the Employee Ownership Association and sponsored by the John Lewis Partnership indicates there may be real benefits to increasing employee participation in a business.

The research indicates that employee ownership has a positive effect on businesses. Since 1992 listed companies that are more than 10% owned by their employees have outperformed other FTSE companies by an average of 10% per year. The UK employee-owned sector has grown at a rate of 1.1%, compared to 0.7% for the economy at large. This equates to a growth rate for employee-owned firms which is over 50% higher than the economy at large.Moreover, employee-owners have higher levels of job satisfaction and feel a greater sense of achievement with increased fulfilment and job security.

Employee share schemes may have their drawbacks but time will tell whether these are outweighed by the benefits.

This content is correct at time of publication