Employee share schemes reach record high despite downbeat retail investor mood

There are now over 16,000 share schemes registered in the UK, a jump of almost 1,000 on 2021 according to data from HMRC, as listed firms turn to the tax-advantaged schemes to incentivise employees as an alternative to cash bonuses and pay rises.

The schemes allow workers to get a stake in their employer’s share capital and sell at lower rates of income tax and capital gains.

Lynette Jacobs, Share Plans & Incentives Partner at Pinsent Masons, said: “More and more businesses are recognising the considerable benefits of tax-advantaged share schemes as an effective employee engagement tool.

“Rising wage inflation and interest rates could result in more companies implementing tax-advantaged employee share schemes as a form of remuneration — this would enable them to conserve cash by offering equity instead of salary increases.”

It remains to be seen whether the schemes will be effective at retaining key staff, Jacobs added, as share prices could tumble amid continued economic uncertainty. The Nasdaq-100 index of top US technology companies has already dropped 27% since the start of the year.

It comes as US investing app Robinhood laid off almost a quarter of the company’s workforce after the value of assets held by the company plummeted 31% in the three months to June, as almost two million users quit trading on the app.

Robinhood boss Vlad Tenev wrote in a blog post: “We have seen additional deterioration of the macro environment, with inflation at 40-year highs accompanied by a broad crypto market crash.

“In this new environment, we are operating with more staffing than appropriate.”