Employee share incentive schemes under review  

Use of two tax-advantaged employee share schemes has declined since 2016, prompting a review into whether their rules are sufficiently simple and clear, and contain enough flexibility to meet companies’ needs.  

A government-commissioned research report published in June found that offering share and share option schemes improved business and employment outcomes, especially staff retention and recruitment. However, over half of companies that had registered for schemes in the past ten years were no longer aware that they had done so.  

A third of the businesses surveyed said the schemes were too “complicated, time-consuming and costly” to set up. Some interviewees doubted the suitability of the schemes for smaller businesses. Others thought that increasing the monetary limits would make the schemes more relevant to more senior members of staff. 

Announcing a review of two of the share schemes – Save As You Earn (SAYE) and the Share Incentive Plan (SIP) – Victoria Atkins, Financial Secretary to the Treasury, said the government was “keen to ensure the benefits of these schemes are felt widely by employees” especially those on lower incomes.  

  • The SAYE scheme allows employees to buy discounted shares in their company by contributing up to £500 a month to a savings contract for three to five years. The money saved and interest earned is tax free. The number of companies and employees using SAYE has fallen over the past eight years. 
  • A SIP lets companies help employees to buy shares in their company or offer them as awards, tax free. Companies can give employees up to £3,600 of free shares each tax year and individuals can buy shares out of their salary for up to £1,800 in value or 10% of their income, whichever is lower. Employees pay no income tax or national insurance contributions on the value of the free or matching shares provided they keep the shares in the plan for at least five years.  

The government’s ‘call for evidence’ seeks views from businesses, business representative organisations and employees on: 

  • the effectiveness and suitability of the schemes; 
  • current usage and participation; 
  • whether the schemes’ rules are simple and clear and offer enough flexibility to meet individual companies’ needs; 
  • whether they incentivise share ownership for lower earners; 
  • what other performance incentives businesses offer their employees and how they compare with SAYE and SIP.  

The final date for responses is 25 August 2023, but there is no indication when the government will consider the findings.