# = pounds sterling
HM Treasury News Release
213/98 18 December 1998
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INCREASING EMPLOYEE SHARE OWNERSHIP
A new drive to increase the number of companies offering share
schemes to their workers was launched today by the Economic
Secretary Patricia Hewitt.
The Minister launched a consultation document at the third
Productivity Challenge Roadshow in Loughborough. The consultation
seeks views on:
how the Government can encourage more companies,
particularly smaller and unquoted, to offer all-employee
share schemes ;
what are the existing barriers to participation in such
schemes; and
how the Government can encourage longer term holding of
shares by employees.
Ms Hewitt said:
"Britain's productivity lags behind that of our main
competitors, as does the participation in employee share
ownership schemes. These schemes have an important role to
play in increasing that productivity by harnessing the
ambition of employees to see the company where they work
succeed.
"Currently, less than half of UK listed companies have at
least one all-employee tax-advantaged scheme. We have to
find out why the take-up for these schemes amongst the
listed companies is as low as this. We also want to promote
long term holding by the employees.
"This Government wants to see an increase in the number of
companies, particularly smaller companies, that offer share
schemes for all employees, and we would like to see
employees building up their shareholdings in their
companies over the longer term."
There are currently three tax-advantaged schemes designed to
promote employee share ownership. These are:
the Approved Profit Sharing Scheme (APS);
the Save As You Earn Sharesave Scheme (SAYE); and
the Company Share Option Plan (CSOP).
At present around one million employees are given shares and a
similar number are granted share options each year though these
schemes. About 7 per cent of the workforce currently
participates.
NOTES TO EDITORS
1. The Approved Profit Sharing (APS) scheme allows companies
to make tax deductible payments to a trust which buys
shares in the company and appropriates them to scheme
participants. All employees (including part timers) with 5
years' service must be eligible to participate on similar
terms, but most companies accept those with much shorter
service. The shares must be left in trust for at least 2
years, and are free of income tax if left in trust for a
further year. Currently 859 companies offer this scheme and
it has one million participants.
2. The Save As You Earn Sharesave (SAYE) scheme allows
employees to enter into a 3 or 5 year savings contract to
save fixed monthly income sum of between 5 and 250 Pounds,
receiving a tax free bonus at the end (with additional
bonus if 5 years savings held on deposit for a further two
year). Bonuses, equivalent to fixed rate interest, are set
by the Treasury. Proceeds of savings and interest may be
(but do not have to be) used to exercise - free of income
tax - share options granted at the start of the contract.
Options can be granted at a discount of up to 20% of the
market value. As with the APS scheme, all employees
(including part timers) with at least 5 years service must
be entitled to participate on similar terms. Most schemes
accept those with much shorter service. Currently 1,201
schemes offer SAYE schemes with 1.25 million participants.
3. The Company Share Option Plan (CSOP) allows companies to
grant employees options to purchase shares at a future date
at the market price of the shares at the time of grant.
Each participant may be granted options over shares worth
up to 30,000 Pounds at any one time. No income tax is charged on
the increase in value of the shares between grant and
exercise provided the two main rules are observed: options
must be held for at least three years; and there must be a
gap of at least 3 years between each tax-relieved exercise.
The scheme is discretionary: companies can select those
employees or directors to whom they wish to grant options.
There are currently 3,769 companies offering SAYE with
450,000 participants.
4. Media copies of the consultation document are available
from the Treasury Press Office on 0171 270 5185. Non-media
copies of the consultation document are available from the
Treasury Public Enquiry Unit on 0171 270 4558.
5. The Productivity Roadshow was held at BG Technology,
Loughborough. There will be similar regional events
throughout the UK over the next few months, as part of the
Government's consultation on the Pre-Budget Report.
Ministers from a number of Government departments will be
involved, and they will want to discuss directly with local
business people and others possible solutions for closing
the productivity gap.
6. The Pre-Budget Report was published on 3 November. As well
as setting out the steps needed to secure high and stable
levels of employment, it forms the basis for a wide ranging
consultation on the steps that need to be taken to address
the UK's long-standing productivity gap.
7. If you have access to the Internet, you can find this news
release and other Treasury information at http://www.hm-
treasury.gov.uk