Financial participation schemes
June 9, 2008
I’ve just read in the news that Asda are to issue a £37.5 million pay out to the 20,000 employees who participate in their save-as-you-earn share plan. Employees can save up to £250 per month, with the average being £43.
Financial participation schemes are quite common with large organisations such as Asda, and include other arrangements such as performance or profit related reward schemes. In one of my previous organisations, salary increases were related to the outcome of employees’ appraisals (there were four levels) and an overall ‘pot’ of money was made available relating to the financial performance of the organisation, which was then shared fairly across the workforce depending on numbers of employees with scores at each level. At the highest level an employee could receive around a 7% increase and a bonus of £1000, so it was worth the additional input to achieve the best appraisal outcome. Of course, the better the company did, the bigger the salary review pot was so again it was worth everyone’s contribution throughout the year. The only downside to this method was that some employees believed their managers made biased or inaccurate judgements on performance, so the system needed to be closely monitored and was updated to try to make it fairer year on year, with the help of employee feedback gathered using an evaluation exercise.
Another example of a financial participation scheme is the John Lewis Partnership, which is owned by its 69,000 permanent employees (“partners”). Early last year each employee received an 18 percent bonus as their share in the record profits made. The idea behind this arrangement is that by giving all employees a stake in the business and a voice, they will contribute more to the company and its customers, and to be honest, I’ve always had a great customer experience when shopping in John Lewis.
The purpose of financial participation is that employees gain a vested interest in the profitability of the company which encourages greater commitment and reinforces the aims of the organisation. Additionally, schemes such as shared ownership provide a means of disseminating important information to members through reports, updates and marketing material, so there are benefits for improved communication as well. Whilst it may not be something that many companies would wish to look into in the current economic climate, I think that some sort of financial participation scheme is certainly something to consider when looking for ways to involve employees more in the business. If the scheme is transparent and clear, it should motivate staff and give them a sense of value and importance as their contribution can be directly measured in one of the most important places – in their pay packet.
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