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New guide to SIPs

Share incentive plans are a tax-efficient way of promoting employee share ownership and can boost engagement by encouraging employees to invest in the business. But the plans can be complex to administer and promote, and they represent a riskier form of share-based reward than other all-employee share schemes. That’s the message from a new study by Incomes Data Services.

What is a SIP?

The share incentive plan (SIP) is an all-employee scheme that offers tax breaks for employees holding shares in the company for which they work. The legislative and tax approval framework that defines SIPs gives companies considerable flexibility to set up a plan that suits their business requirements.

A key feature of the SIP is that it can be tailored to include either or both free and employee-purchased shares. What’s more, free share awards can be linked to company, team or individual performance. Employers can also encourage participation by matching shares purchased by employees.

What you will find in this report

This IDS research takes a detailed look at the extent to which 30 companies offer the three main types of share available through a SIP – free, partnership and matching shares.

Across 29 pages, the report:

  • analyses variations in savings arrangements, matching ratios for employee-purchased shares and company policies on forfeiture and the reinvestment of employees’ share dividends.

  • describes the different types of shares available through SIPs

  • sets out the key HMRC requirements, including annual savings limits

  • highlights the tax advantages for employers and employees

  • summarises the rules on eligibility, forfeiture of shares and the use of performance criteria in allocating awards

  • gives details of the SIPs in operation at 30 named companies.

Want to know more?

Title: “Share incentive plans”, IDS Study 840, February 2007, Incomes Data Services.

Availability: Call IDS customer services in London, tel: 020 7324 2599, or you can order online at www.incomesdata.co.uk/studies/sharescheme.htm

IDS HR Studies analyse employers' HR and personnel policies, procedures and practices. The service is designed to enable subscribers to learn from the experience of others and to benchmark their policies and practices against those of other businesses.

Incomes Data Services is an independent research organisation providing information and analysis on pay, conditions, pensions, employment law and personnel policy and practice in the UK and rest of Europe. For more information about IDS jump to www.incomesdata.co.uk.

Date 10/07/2007

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