Debi O’Donovan, editor of Employee Benefits: Is now the time to launch an employee share scheme?

Employee share schemes are doing a roaring trade currently. After a few years in the doldrums sharesave schemes are taking off again.

It appears that companies have taken a collective view that the share market has pretty much bottomed out and now is the perfect time to give staff the chance to save into future share price rises.  

This is a clever tactic, because if all goes as expected, just as the economy gets up to speed and retention of staff once again becomes an issue, being a member of a sharesave scheme (that is doing well) might just make people pause to think before switching jobs.

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No doubt, after the horrid experiences of recent months, few employees will be feeling too fond of their employer. For now it is a case of knuckle down and hold onto that job. But engagement and loyalty has been destroyed and employers need to think carefully about how they start to make amends in order to hold on to good staff in the future.

Share options are a cheap and easy way to achieve this. The employee saves in their own money, but doesn’t have to take the risk of actually buying the shares. However, if the share price does rise over the next few years they could be in the money big time when the scheme matures (as which point it is crucial staff get financial advice to ensure they maximise tax breaks).

A more interesting angle on this is how employers might consider using options as incentives. Cash bonuses and pay increases are thin on the ground in 2009, but by launching incentive and performance schemes based on option employers can still reward staff in the future for work done now.

Of course this can be seen in one of two ways – not all companies can afford to reward good performers what they are worth because of market conditions that were not of their own making. So why not make the most of share price rises and give staff their just deserts in a few years time.

The opposite view is, why should staff gain rewards simply from stock market changes that have little to do with actual individual performance? If nothing else, the lessons of the past year or so have shown us that rewards should only be earned for genuine performance.

However, word on the street is that employers are going with option one for the time being. Ah, as the French saying goes: ‘the more things change the more they stay the same’.