More support is needed for SMEs and large companies to encourage employee share schemes, with Ireland lagging behind rival countries in terms of share scheme offerings, according to the Irish ProShare Association (IPSA).

IPSA said the employee share ownership offers ways to improve productivity, alleviate hiring challenges and assist in the recruitment and retention of key staff ahead of the organisation's annual conference at PwC's Dublin office on Wednesday.

Marie Flynn, PwC tax director and chairperson of IPSA, said: "Ireland is lagging behind rival countries in share scheme offerings. All sizes of companies are being negatively impacted risking the loss of key talent.

"Being competitive is vital in this volatile and changing economy we find ourselves in and share equity is an important part of any compensation package to be able to maintain a competitive edge. 

“Barriers in Ireland to share ownership include a lack of suitable schemes available, the cost and administration of plan implementation, scepticism towards the benefits of employee share ownership, lack of employee finances and lack of institutional support and leadership from government.”

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IPSA has recommended that the Key Employee Engagement Program (KEEP) be reformed to increase take-up by extending its availability to companies with subsidiaries, reducing the number of conditions that need to be met and changes to capital gains tax treatment to make it available to family companies.

The organisation said that new save as you earn (SAYE) schemes are no longer viable as no financial institution in the Irish market is willing to hold such employee savings, and that government needs to step in to designate or facilitate a bank or other savings carrier to operate the SAYE scheme.  

IPSA also wants the seven-year time limit for exercising unapproved share options removed to bring Ireland in line with other countries, and allow companies to grant long-term incentive options to employees at any price.

Reducing the Benefit-in-Kind on employer loans to buy shares from the 13.5% rate to a market rate would also be welcome and would also bring Ireland into line with international competitors, according to IPSA.

"The changes required to make these improvements are small and broadly cost neutral for the government but would be very welcome to encourage more companies to offer shares to their employees and employees to invest in the businesses in which they work," Flynn concluded. 

"It is a “win win” for Irish businesses as share ownership would not only increase performance and productivity but is also a great way to attract and retain key talent.”