The average amount being saved in an employee share scheme each month has increased significantly in the last year, according to a new survey

ifs Proshare’s 2007 edition of its annual surveys of Save As You Earn (SAYE) and Share Incentive Plan (SIP) schemes has revealed that around 5 million UK employees are currently participating in some form of employee share plan, and the average amount saved per month is over £80.

SAYE scheme participants are saving an average of £89 per month – up from £71 the previous year. The average amount of money being saved in a SIP rose to £83 a month, up from £72 in 2006. Partnership shares remain the most popular type pf shares, with 70% of companies operating a SIP offering such shares. Free shares are being offered by 27% of companies operating a SIP and 62% of companies offer their employees online access to information about the number and value of their shares.

As well as being a relatively simple but effective method of saving, Share Incentive Plans are the most tax efficient. They allow employers to give staff up to £3,000 worth of free shares a year and each year, employees can buy a further £1,500 worth of partnership shares from their gross salary, or up to 10 per cent of gross salary, whichever is less. In addition, employers can give up to two matching shares for every share the employee buys. Employees need to hold their shares for at least 5 years to obtain full tax relief.

Perhaps the most important thing to be aware of if you’re considering joining a SIP is that returns are directly dependant on the performance of the company’s shares on the stock market. In the current economic climate this may seem to some like too big a gamble to take.

There are also of course benefits to the employer. SIPs are used as a recruitment incentive as well as a means of improving staff retention and boosting morale. They also benefit from corporation tax relief.

Are you a member of a Share Incentive Scheme and if so what benefits do you hope to get from it?

How big a factor do you think they play in staff recruiting and retention?