Are employee share plans the way ahead for pubcos to improve

Staff retention is an in-creasingly major issue for breweries and lei-sure operators throughout the UK, with recent research suggesting that head-hunters are actively targeting the best managers of rival chains at a rate of one per week. Competition is cutthroat, and with staff seeing little to differentiate one employer from another, businesses risk wasting their profits on continuous recruitment costs. For the leisure sector, the consequences of poor staff retention are significant. The Chartered Institute of Personnel & Development estimates the average cost of replacing a member of staff is £3,933. And there are repercussions beyond the financial. Every time an employee leaves, the consequences ripple through the rest of the team causing dissatisfaction and unsettlement. For those responsible for replacing the leavers, it can be a thankless task. Latest research (by staff retention consultancy learnpurple) suggests that leisure managers spend approximately half their time recruiting new managers rather than running their operations. The most traditional method of encouraging employees to stay is a salary increase. In the current market however, when funds are tight, companies don't automatically have this option and sohave to find other, low or no-cost methods of incentivising staff. Previous initiatives to reduce staff turnover have focused chiefly on improving communications, but nothing incentivises people like the opportunity to make more money and get something for nothing. Analysis shows that 72% of companies in the leisure sector have implemented savings-related share-option schemes (Save As You Earn ­ SAYE). These schemes are clearly popular but how much more of an incentive would a company generate if it was able to give its employees additional shares? The Share Incentive Plan (SIP), introduced by the Governmentin 2000, is a tax-efficient share-purchase plan where employees buy shares from their gross salary. The company can then choose to award additional shares (known as matching shares) free of charge for every share the employee buys. The table, left, shows returns on a real SAYE option in the leisure sector. Included is a comparison of how a SIP would have performed over the same period. Although the SIP is designed as a longer-term investment, the returns it can generate are significantly higher than the SAYE plan. And the employee is not the only party to benefit from the SIP. For the company, the advantages are numerous. Firstly, and probably most significantly, it does not have to pay employer's National Insurance Contributions (NIC) on salary used to buy shares. It is, therefore, in its interests to encourage as many staff as possible to become involved. Secondly, if it chooses to offer matching shares, these are only released should the employee remain with the company for three years. To get the plan off to a good start, it is imperative that it gets a good launch and presentation. Meeting employees face to face to explain the benefits of joining the plan is one successful way of ensuring that they understand what is on offer. Email or intranet campaigns or the distribution of promotional literature can all help. Traditionally, companies with a highly-mobile workforce have viewed any sort of long-term incentive plan as being unsuitable. This doesn't have to be the case for pubcos any longer. We all know and understand the value of open communication and good leadership in improving morale and commitment among staff. However, rarely will people be interested in the financial well-being and success of a company unless they themselves will benefit from it. l Claire Richardson is head of share scheme administration at Halliwell Consulting in London Launching a SIP Do: Train HR and payroll staff so that first share purchases can be handled confidently Do: Ensure communication material is clear and written in plain English Do: Present to as many of your staff as possible Do: Set up a helpline to answer staff queries Don't: Send one letter and hope everyone signs up Don't: Rush implementation so HR/payroll staff are unprepared and nervous Don't: Produce heavy, legalistic documents