People management: SME staff can be shareholders too.
Are employee share schemes suitable only for the employees of large organisations or can the staff of smaller firms also enjoy the benefits of share ownership? To date, many SMEs have viewed employee share schemes as too daunting to contemplate. But London-based ProShare, an independent, not-for-profit organisation which promotes share ownership for employees and private individuals, aims to convince SMEs that employee share schemes suit firms of all sizes.
While larger UK companies have been quick to appreciate the benefits of employee share ownership, many smaller firms are much less comfortable with the idea, says Sally Russell, ProShare's head of employee share ownership.
'Many SMEs feel these schemes will be too expensive to introduce and too complicated to run,' she explains. 'We want to dispel all the jargon that surrounds them and help managers feel less intimidated by the concept.
Our goal is to increase the number of companies offering share schemes by helping them understand the schemes that are available and increase the number of employees holding shares by helping them understand the benefits.'
Research by ProShare suggests that staff motivation is the key benefit of employee share ownership. Shareholding staff generally become more interested in their firm's short-term performance and its longer-term prospects. Russell also points to the financial benefits of adopting employee share ownership. Firms can recover the scheme set-up costs, which are offset against profits when calculating corporation tax. Moreover, if firms adopt one of the three schemes currently recognised by the Inland Revenue - the profit-sharing scheme, the company share option plan, or a save-as-you-earn share option scheme - employees receive tax benefits.
And once a scheme is set up, it's very easy to maintain - 'a lot less aggravation to run than a company car scheme,' Russell argues.
To help SMEs with any potential difficulties and to reduce the costs of legal advice, ProShare has recently launched the ESSential Club (Employee Share Schemes Club). This club aims to help quoted and unquoted companies that are either considering establishing employee share ownership plans or have already done so and are looking at ways of increasing take-up.
It aims to appeal to all small companies that need to know more about the role that these schemes can play in advancing their business. Membership costs £325 per year and is open to companies with fewer than 250 employees in the UK or less than £150 million market capitalisation (telephone ProShare on 0171 600 0984).
'There are some very simple, straightforward schemes, which are relatively cheap to set up yet bring enormous benefits in terms of employee motivation, retention and goodwill,' says Russell. And, with these schemes, size really doesn't matter. Firms with just a handful of employees may find a scheme to suit.
Judith Oliver is a contributing editor for Management Today.