Magazine article Management Services

Financial Participation Makes Committed Employees

Magazine article Management Services

Financial Participation Makes Committed Employees

Article excerpt

Gordon Brown's budgets have given tax breaks to a variety of employee shareholding schemes; the government believes that employee financial participation is a good thing. In a new report from the authoritative Institute for Employment Studies, this belief is tested and the benefits and problems made clear. Employee financial participation isn't new, but interest is awakened, as IES director Richard Pearson remarked: "Profit sharing as cash or in shares, or Save As You Earn schemes, have long been used by employers as incentives to productivity and commitment. Principles traditionally applied to the boardroom are increasingly being passed down to the shopfloor. Employers see a number of organisational advantages and the government is encouraging what it perceives as a support for international competitiveness. What we wanted to find out was how effective such schemes actually are, and why they are or are not adopted."

Financial participation links an element of the paybill to profitability, and so can be used as a means to control costs. By taking advantage of tax breaks, it offers a tax efficient route for remuneration, and can help to attract or retain staff. By encouraging a sense of mutuality between employer and employee, it can improve both industrial relations and productivity, and with it, employee commitment to the success of the organisation.

Peter Reilly, Principal Research Fellow at IES and co-author of the report said: "Some companies use these schemes merely as a form of good financial management, some only as a resourcing tool. …

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