Newspaper article The Evening Standard (London, England)

Share in Your Employer's Success; Would You Be Happy to Get Your Pay Rise in Shares? Although above Inflation Raises Are Due This Year, Perhaps Other Forms of Payment Could Be More Rewarding in the Long Run. by Niki Chesworth

Newspaper article The Evening Standard (London, England)

Share in Your Employer's Success; Would You Be Happy to Get Your Pay Rise in Shares? Although above Inflation Raises Are Due This Year, Perhaps Other Forms of Payment Could Be More Rewarding in the Long Run. by Niki Chesworth

Article excerpt

Byline: Niki Chesworth

FINALLY there is some good news on pay. Despite average earnings having fallen in real terms for five consecutive years unprecedented in at least the past 70 years the squeeze on salaries will ease in 2014, with figures from Barclays earlier this week finding that more than half of UK businesses polled planned to increase employee pay during the year.

However, there are other ways to not only attract but incentivise and retain staff and one of the most lucrative of these is an employee share ownership plan. Firms that offer these not only make better employers, they are also more likely to do better than other firms giving staff more job security and better prospects.

According to research from corporate finance firm Capital Strategies, FTSElisted companies that encourage employees to purchase shares outperformed those that do not by as much as 30 per cent in 2013. The 69 companies tracked by the firm's UK Employee Share Ownership Index delivered total average returns of 53.3 per cent in 2013, well above the 20.9 per cent average returns delivered by all 623 companies on the FTSE All-Share Index.

how do employees benefit? There are two types of all-employee scheme. Save As You Earn (SAYE), or Sharesave, allows employees to save up and then decide whether to use this cash to buy shares at a discount. From April they will be able to save up to PS500 per month.

Share Incentive Plans (SIPs) enable employees to buy shares in their company out of their gross salary. From April, employees will be able to acquire "free" shares worth PS3,600 per year or partnership shares worth PS1,800 per year. While this may sound like staff have to pay out, rather than take home more, not all schemes require employees to pay for shares.

For example, the Starbucks share scheme, called Bean Stock, gives staff employed by Starbucks since May shares the following November. Half of these vest (can be taken) after the first year and the remaining 50 per cent vest the following year. This encourages staff to stay with the firm to benefit.

Then the following year, staff once again receive another batch of shares generally between five and 10 shares per year. In cash terms, last year's grant was worth around PS400 for Starbucks baristas. Over time, the perk adds up and as Starbucks shares have increased by more than 750 per cent over the past five years, staff have also seen significant capital growth. Luca Russo, who has been a Starbucks "partner" for more than 14 years, since joining the company in December 1999 as a barista, is now store manager at Starbucks Marylebone High Street. He says: "When I tell people what I used my Bean Stock for, they do not believe me. But I actually used them for the deposit of my first flat in London. …

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