Tesco’s employee share programme, Save As You Earn, will pay out £30 million to staff members. What is it, and is your business eligible for one?
Tesco believes every bit helps, but its most recent expenditure is by no means insignificant. The company has announced that it will pay out £30 million to employees via its employee share plans, known as Save As You Earn.
Ken Murphy received a roughly £10 million CEO salary in April, and more than 20,000 Tesco workers will profit from this windfall. The majority of the prize money will go to warehouse teams and shop floor workers. This year, there was a compensation increase for both roles.
Tesco is not the sole provider of Save As You Earn. This is a kind of stock plan that any business can join. The scheme’s operation, Tesco’s rationale for awarding the compensation, and the significance of the payday for Tesco are all explained here.
What is a Save As You Earn (SAYE) scheme?
One kind of employee benefit program is SAYE. By giving up a percentage of their pay, employees can buy shares in the company they work for.
Employees will contribute a specific amount each month, up to a maximum of £500, to savings. When the plan matures—after three or five years—employees have the option of purchasing shares at a discounted price or having their money returned.
After purchasing the share options, employees have the option to either hold onto them in the hopes of earning higher returns down the road or sell them right away for a profit.
Tesco has disclosed the amount that its employees should anticipate receiving from the sale.
If workers had saved the maximum amount of £500 a month for three years, they would have made nearly £10,000. They may win £20,000 from the jackpot if they had been saving for five years; that would be equivalent to nine months’ worth of wages for those making the living wage.
Given that employees invested £68 on average per month, most Tesco employees will profit by approximately £2,560.
Could my company pay out £30m?
A corporation’s ability to provide a SAYE program is rare, unless it is a publicly traded company like Tesco that sells publicly traded equities.
This is so because the share price needs to be appraised by the public in order to determine a staff payout. Tesco’s share price is at 303p, up 20% from a year ago. Due to its knowledge of the market price, the company has been able to offer staff shares at a reduced price of 188p.
It is far more difficult for private enterprises to participate in a SAYE scheme since they cannot simply value their shares if there are no widely accessible market valuations on a stock exchange.
However, there are other options available to small employers, such as the Enterprise Management Incentive (EMI) program, which is available to companies with fewer than 250 workers.
Employees may buy shares through an EMI for a maximum of £250,000 during a three-year period. Before the scheme is put into place, the value of each share will be decided upon with HMRC.
Another alternative is the Company Share alternative Plan (CSOP), which enables directors and workers to purchase tax-free options worth £60,000 following three years of employment with the business.
Payment prompted by CEO pay backlash
Tesco may have chosen to compensate staff in response to criticism regarding the pay of senior staff members. Share plans let teams feel like they are being appropriately compensated for the company’s success and help employees feel appreciated.
CEO Ken Murphy received the highest salary and benefits of any Tesco executive, amounting to £9.9 million. Unions referred to this as a “slap in the face” to employees. Tesco was among the shops this week who were charged with not paying independent contractors the true Living Wage.
The payout “is a reflection of [Tesco employees] hard work and the brilliant job that they do serving our customers every day,” according to Emma Taylor, Chief People Officer of Tesco.
