Some 20,000 Tesco employees have experienced a financial boost from the company’s share save scheme, benefiting from a £30 million payout. This development comes on the heels of Tesco’s chief executive, Ken Murphy, receiving a staggering £10 million earnings package, more than doubling his previous year’s payout and setting a record for the organisation.
Each of these Tesco workers, participating in the share save scheme, received a portion of the £30 million payout. This scheme allows employees to purchase shares at a significantly discounted price after three or five years, based on the market valuation at the scheme’s inception. If the shares appreciate, employees can either keep them or sell them for a substantial profit.
For instance, a worker who saved an average of £68 a month over five years stands to earn £6,640 from an initial investment of £4,080, yielding a profit of £2,560. Those able to invest the maximum of £500 monthly could see profits nearing £10,000 in three years and almost £20,000 in five years if they choose to sell their shares immediately. The risks are minimal as participants can reclaim their savings if the share value does not increase, although they would forgo any potential interest from a traditional savings account.
While the scheme is lucrative, its participation rate is relatively low. With around 300,000 employees in the UK, fewer than one in ten are set to benefit from this windfall. This raises concerns about the scheme’s inclusivity and effectiveness, especially for lower-paid workers who may struggle to save in the current economic climate. Luke Hildyard, director of the High Pay Centre, noted, “I’m sure it’s well-intentioned but the drawback with it is that it doesn’t involve the entire workforce so it potentially creates inequality.”
Moreover, performance-related bonus schemes that offer free shares or cash are typically reserved for management and professional staff. Tesco does provide a ‘thank you payment’ of around £300 for full-time workers outside its performance bonus scheme, recognising their ‘excellent’ work. However, many lower-paid employees prefer the security of higher guaranteed basic pay rather than variable bonuses.
Despite these concerns, such schemes, including those at other companies like Sainsbury’s, are generally positive as they offer employees a chance to share in the company’s success. Yet, they do little to address the broader issue of the growing pay gap between top executives and regular employees. If the next government seeks to increase employee share ownership, a more inclusive approach would be necessary.
While the share save scheme provides an attractive opportunity for some Tesco workers to benefit from the company’s success, it also highlights the ongoing issue of income inequality within large corporations. The significant earnings of top executives compared to the average worker underscore the need for more inclusive financial initiatives.