£200 million worth of free shares given to workers last year

UK firms gave more than £200 million worth of free shares to employees last year, according to an annual survey by IFS.

A total of 378,497 employees received an average amount of £536.37 in shares during 2011.

The tax free shares were given to employees as part of HMRC's approved Share Incentive Plans (SIPs) that are often used by firms to reward good staff performance and retain workers. SIPs offer employees tax and national insurance advantages of an annual maximum amount of £3,000 to hold shares in the company or group they work for.

Although the number of employees taking part in the scheme was up compared with the previous year, the average amount received by each individual fell.

John Collison, Head of IFS Proshare, said: "Giving employees free shares remains a popular, tax-efficient way of rewarding employees at all levels. These are often given in recognition of good performance, either of the individual or the company, or as a way of retaining staff due to the tax implications of selling free shares within three to five years of receiving them."

However, many private sector workers are unaware that employee share schemes are available to them, he added.

"We calculate that around 2 million UK workers are currently participating in an all employee share scheme. If you work at a publicly listed company, it's very likely a range of share scheme options are available to you."

Save As You Earn (SAYE) remains one of the most popular schemes as it is often a low risk way of buying company shares and also offers tax advantages.

The survey, which questioned over 451 companies including 95 of the FTSE 100, found that two million employees were enrolled into a SAYE scheme in 2011 - 37 per cent of those eligible to participate.

The average monthly amount of money employees contributed to a SAYE scheme grew slightly from £101 in 2010, to £102 in 2010. Employees can save a maximum of £250 per month from their net salary into a SAYE scheme.

Some of the UK's largest employers offer a range of SAYE and SIP share schemes, although HMRC states that smaller firms are also eligible for the schemes.

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