Exclusive: Rishi Sunak plans shake-up of worker ownership schemes

Rishi Sunak and Jeremy Hunt are drawing up plans to revamp schemes designed to hand workers a stake in their employers, City A.M. can reveal.

The Treasury will today ask businesses for their view on the effectiveness of government-sponsored programmes that steer staff toward taking stakes in their employer by offering financial incentives.

The Prime Minister and Chancellor hope the shake up will stimulate economic growth by raising worker productivity and motivation.

Under the current landscape, workers can buy discounted shares in the company they work for if they set aside up to £500 each month for either three or five years, known as the Save As You Earn programme. 

The interest and any bonus accrued at the end of the contract is tax free, and participants don’t pay income tax or national insurance on the difference between what they pay for the shares and what they’re worth at market value.

A separate package, called the Share Incentive Plan, allows firms to gift staff up to £3,600 of equity in their company or help employees with the cost of purchasing shares. If employees hold those assets for five years, they don’t pay income tax or national insurance on their value.

Capital gains tax reliefs are also available on each of the programmes.

The intention behind the programmes are to amplify employee motivation and strengthen ties to their employer, hopefully raising staff retention and boosting productivity. 

They are targeted at low earners who often lack the resources to build up a portfolio of assets to strengthen their long-term financial health.

Research carried out by HMRC also shared with City A.M. found 81 per cent of firms that participated in the employee share schemes say they have fortified their business. Almost three in four said they helped retain and recruit staff.

Half of the companies surveyed by the taxman said they took advantage of the ownership scheme “to create a feeling of ownership among their staff”.

Victoria Atkins, financial secretary to the Treasury, told City A.M.: “Employee share schemes are an effective way to boost motivation in workforces by giving people an extra stake in what they do – and they offer a boost for business.”

“Growing the economy is a priority for this government and one way to make this happen is by making these schemes as easy as possible to set up,” she added.

Simplifying the schemes and ramping up communication to make sure employers are aware of them could lift participation.

HMRC said nearly a third of businesses that are unaware of the schemes say they are too complicated to set up.

The call for evidence is intended to expand the programmes’ use by making it easier for businesses to set them up and offer them out to staff.