The Irish ProShare Association has called for the introduction of a Government-backed salary for shares scheme to help struggling businesses protect jobs and withstand the impact of the Covid-19 economic crisis.
IPSA, a non-profit organisation which advocates for increased employee ownership in Irish business, says that offering employees shares in the companies they work for in lieu of part of their salary could be an alternative to redundancies for some businesses, providing them with a cash lifeline as they seek to recover from the downturn.
IPSA is not advocating salary cuts for employees but, conscious that it is already happening due to Covid-19 pressures, wants the Government to allow salary to be swapped for shares without employees or employers being hit with a tax bill for doing so.
IPSA Chair Eleanor Cunningham said: “Payroll is the single biggest cost for small businesses. Many companies are desperately trying to avoid redundancies, and measures specific to the Covid-19 circumstances need to be introduced to provide a lifeline for businesses, particularly indigenous SMEs, which are the lifeblood of the Irish economy.
“A salary for shares scheme which allowed a portion of remuneration to be directed into shares in a temporary tax efficient manner would provide SMEs with a very viable cash consolidation option which could ultimately help them survive this crisis. It would also provide a financial commitment to employees suffering a loss of income that they will benefit directly when the business recovers.”
Another Covid-19 specific measure that IPSA is calling for is the introduction of optional savings or payment holidays for employees in all Revenue-approved share schemes. This is so that workers who are experiencing hardship due to reduced pay do not withdraw permanently from schemes and possibly lose out on benefits and favourable tax treatment.
IPSA Chair Eleanor Cunningham said: “Revenue authorities in the UK this week extended the payment holiday entitlement for employee share scheme contributions to more than 12 months when payments are missed due to the impact of Covid-19.
“The Irish Government needs to take a similar approach. Tens of thousands of employees are members of share schemes in more than 500 companies throughout Ireland, and these schemes need to reflect the changed working circumstances many people face as a result of the Covid-19 pandemic.”
IPSA’s proposals are included in a Covid-19 submission to the Government. However, IPSA is also seeking cross-party support for immediate implementation of the Covid-19 measures to support companies with employee share schemes.
IPSA Chair Eleanor Cunningham added: “Companies across Ireland are now faced with an external, existential threat, not of their making and more than ever, require the assistance of the State. With the economy almost grinding to a halt, it will be many months and possibly years before individual businesses and the economy will recover.
“Increased employee share ownership can aid our economic recovery. Studies show that businesses that have some form of employee ownership are more resilient in times of uncertainty. They weather recessions with fewer jobs lost, and they bounce back better quicker and stronger than other companies because their employees are more invested in the success of the company.”
Listen to Eleanor Cunningham talk about Salary for Shares on the Newstalk Business Breakfast.