Employers 'limited share schemes to senior managers during credit crunch'

Senior managers enjoyed better access to employers' share schemes during the credit crunch than their workforces, official figures have shown. HM Revenue & Customs statistics on pensions and tax-free savings and investment show that the number of companies running share schemes open to all staff declined by 10% over two years – from 1,530 in 2006-07 to 1,370 in 2008-09. During the same period, the number of companies offering discretionary schemes – or enterprise management initiatives – to senior-level staff rose by 25%, from 8,020 to 10,050, the HMRC data shows. Approved share option schemes are often popular with employees because they are entirely tax and national insurance free up to the point of exercise, although any further gain arising after the end of the plan is liable to capital gains tax. However, many employers closed employee share schemes during the recession as part of their cost-cutting initiatives. Plummeting share prices and low interest rates also made schemes less attractive during the recession years. Explaining the increase in schemes targeted at senior executives, Roy Maugham, a tax partner at accountants UHY Hacker Young, said that some employers might feel incentivising senior managers through share options is a more politically acceptable form of compensation than cash payments, given the furore surrounding executive bonuses. "Granting senior managers share options rather than cash is also easier on cashflow, which has been a major concern for many employers during the recession," he said. But the TUC general secretary Brendan Barber warned that restricting share schemes to senior managers could create a two-tier workforce and generate resentment among workers as they failed to recognise the contribution made by all staff to company success. He said: "With many employers reluctant to take on new staff, more is expected of existing workforce. But limiting the rewards for this extra effort to senior staff gives no incentive to the rest of the workforce to go the extra mile. "Employee share schemes have benefits and problems but limiting them to bosses increases the likelihood of them backfiring."