Employee Share Ownership

The Hon. Peter Reith, MP Minister for Employment, Workplace Relations and Small BusinessLeader of the House of RepresentativesParliament House, Canberra ACT 2600

20 July 1999

EMPLOYEE SHARE OWNERSHIP: A MEANS OF CREATING MORE PRODUCTIVE WORKPLACES AND REWARDING EMPLOYEES

Employee share ownership schemes can play a key role in boosting an enterprise’s efficiency and productivity and in rewarding employees for the contribution they make to improving performance.

The conclusions were drawn from a submission by my Department to the House of Representatives Standing Committee on Employment, Education and Workplace Relations Inquiry into Employee Share Ownership. Employee share schemes are a particularly relevant option in the more decentralised workplace relations system now in place and the increased focus it is providing for more flexible remuneration arrangements.

Of course, employee share ownership is not the only option for remuneration and it may not be available or suitable for all organisations, but it is definitely worthy of consideration as firms seek to implement strategies to improve their productivity and competitiveness.

Providing employees with a financial interest in the organisation for which they work seems to be a particularly effective way of increasing employee motivation and commitment and developing a more productive workplace culture.

Employee share schemes can promote the commonality of interests between employers and employees and assist in breaking down any remaining vestiges of adversarial relationships. When you have shares in the organisation for which you work the old ‘us’ and ‘them’ mentality is simply no longer applicable.

The submission has identified a significant increase in both the number of employee share schemes in Australia and the number of employees participating in such schemes over the course of the first half of the 1990s.

Furthermore it concludes that it was likely that there would have been a further increase in more recent years as a result of a number of initiatives taken by the Coalition since coming to office. These include the decentralisation of the industrial relations system, the introduction of enhanced tax concessions for employee share schemes and the provision of employee shares as part of the Telstra privatisation. Nevertheless the level of employee share ownership in Australia remains relatively low compared to a number of other developed countries such as the USA, the UK, France and Japan.

There is clearly scope for further increases in employee share ownership in Australia, particularly given the recent spread of share ownership more generally throughout the community and the increased awareness and understanding of the benefits of shares that this has generated.

The Department’s analysis of its Australian Workplace Industrial Relations Survey 1995 database had found that the presence of an employee share ownership scheme at a workplace was associated with a range of very favourable outcomes. For instance, workplaces with employee share schemes performed better than those without schemes in terms of productivity measures, workplace change, absenteeism, labour turnover and dismissals. When employee share schemes were linked to wider employee participation measures the results were even more positive.

These findings should encourage more firms to give serious consideration to introducing employee share schemes.

My Department will be shortly releasing a booklet to assist employers and employees consider more flexible remuneration options such as employee share schemes, profit sharing and productivity sharing. Copies of the submission are available on the Department’s website: www.dewrsb.gov.au

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