chapter  10
21 Pages

Financial participation schemes: Jeff Hyman

ByJEFF HYMAN

Financial participation schemes aim to provide employees with a stake in the firm for which they work. Schemes can be classified into profit-related pay which offers financial incentives to employees based on organisation profit levels and employee share schemes which offer employees a property interest in the company as well as longer-term financial reward. These forms of financial participation are common in both developed and developing countries. Both approaches aim to enhance productivity through their effects on employee performance. Studies on the impact of profit-related pay are inconclusive, though it appears that its use in tandem with other progressive HR techniques can positively influence employee orientations and performance. The impact of employee share schemes is at worst neutral though positive effects such as reduced labour turnover and expressions of employee commitment are associated with larger allocations of equity and when share schemes are complemented by other forms of employee participation. Nevertheless, under most schemes, share allocations as a proportion of total income are not high and many participants treat their equity as a marginal bonus or dispose of their acquired shares at an early stage.