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Share plans about more than succession

SMSF financial planning practices should look towards the adoption of employee stock ownership plans as more than just a succession planning strategy, according to an expert in the field.

Speaking at the 2015 selfmanagedsuper/NowInfinity SMSF Strategies Day in Brisbane last week, Succession Plus chief executive Craig West said: “Employee share plans are useful in succession, they are useful in enhancing performance and profitability, and they’re also really important in engaging and retaining key employees.”

West pointed out from an employee perspective, employee stock ownership plans were not all about remuneration either, using data from a Melbourne University study to demonstrate that fact.

“The study asked people why you would enter an employee share plan and 68 per cent of participants said it was for a financial pay-off, which is pretty fair,” he said.

“Fifty nine per cent said they did it to get a sense of community, 42 per cent said it was to achieve employee influence on management, and 38 per cent said they entered the scheme to improve individual influence on decisions affecting my daily work.

“So there is a combination of motivating factors there and people who think employee share plans are purely financial are missing the main point.

“It’s actually about employees contributing and being involved in the performance of the business.”

He also said financial planning practices could take advantage of recent changes to employee share scheme laws.

“These changes came in on 1 July this year and reverse all of the unfavourable rules around employee share plans that came in under the previous government,” he said.

In particular, the rules were now very favourable for start-up businesses, he said.

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