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Financial Participation

The first employee financial participation schemes were not introduced into Great Britain until the end of the 1970s. The Labour Party, employer associates and trade unions were united in their opposition to any form of employee financial participation up till the end of the 1970s. By contrast, the Liberal Party, later followed by the Conservatives, lobbied for profit-sharing and employee share ownership in companies and were finally successful in winning over their erstwhile opponents. Since then a number of different employee financial participation schemes have developed.

 

From the beginning of the Thatcher era and at first in the context of the privatisation of state-owned industries and companies employee share ownership in particular gained significance.

 

 

Since 1978 the incidence of profit-sharing and employee share ownership schemes has been greatly influenced by favourable tax legislation offering tax relief for both companies and employees.1 Today, the United Kingdom has one of the highest incidences of employee financial participation in the EU. Four participation models predominate: Save-as-you-Earn (SAYE), Company Share Option Plans (CSOP), Share Incentive Plans (SIP) and Enterprise Management Incentives (EMI). All four schemes are to be reformed in the near future. Financial participation schemes have been extended and simplified.2 The extension of workers’ participation schemes is to be accompanied by labour law reform.3 Political agreement to the idea of extending workers’ financial participation is unknown to date.4

The Save-as-you-Earn programme (SAYE) is one of Great Britain’s most popular employee financial participation schemes with hundreds of thousands of employees participating each year. Based on a savings plan, employees gain the opportunity of acquiring a certain number of share options from a company at a fixed price and for a fixed duration. Company Share Option Plans (CSOP) let a company give individual employees a certain number of share options at a predetermined price and exercise date. There are a number of differences to the SAYE programme such as the selectivity of employees or the discount on the stock market price. Share Incentive Plans (SIP) are particularly suited to small and medium-sized enterprises (SMEs) unable to offer their own share option schemes. This participation model, in existence since 2002, replaced the Approved Profit Sharing (APS) programme available from 1978 to 2002. The Enterprise Management Incentive (EMI) programme was introduced as an incentive for smaller and risk-exposed companies to promote recruitment and staff retention by offering tax-sheltered share options to selected employees.

Wilke, Maack and Partner (2014) Country reports on Financial Participation in Europe. Prepared for www.worker-participation.eu. Reports first published in 2007 and fully updated in 2014.