Oracle staff bag £20,000 in share bonus scheme

Oracle's UK staff have made, on average, £20,000 in little over a year after the software company replaced annual bonuses with...

Oracle's UK staff have made, on average, £20,000 in little over a year after the software company replaced annual bonuses with shares, writes John Kavanagh.

The software giant's move is part of a growing trend among employers - and even one IT contractor agency - aimed at retaining staff in the face of competition from new Internet start-ups, which are tempting people with salary and share combinations and the possibility of high returns in a few years.

Oracle has replaced a 5% annual bonus for all UK staff with shares worth 10% of annual salary. These are paid in six-month chunks of 4% and 6%. Top executives have a ceiling of £8,000.

Staff have to keep the shares for a year under government regulations. If they sell soon afterwards they pay tax - but if they keep them for three years they are tax-free.

"With the old bonus, IT staff on £30,000 got £1,500 and paid 40%, leaving £900," says Oracle UK human resources vice- president Vance Kearney. "They now get £3,000 tax-free, even if the shares don't increase in value, and the prospect of a lot more - the price has quadrupled in the first year.

"Even if the shares halved in value they'd still end up with the old bonus of £1,500 - and it would tax-free."

The scheme was introduced to help Oracle keep staff as it moves into the e-business market, where latest surveys show fast-growing competition for experienced people.

"A prospective employer will have to offer more than £40,000 a year just to beat the value of this year's shares," he says.

The scheme is aimed especially at stopping staff going to US competitors.

"Big UK companies have similar schemes but US multinationals tend not to," Kearney says. "It's hard for UK subsidiaries to convince their US parent to do something like this."

Kearney dismisses competition from similar schemes in new dotcoms. "Start-ups offer lower salaries plus shares and the prospect of becoming a millionaire. But, although there is the odd success, you don't hear about the 200 others that don't make it. It's a gamble - it's better to have shares in a company like Oracle."

Kearney adds that the cost to Oracle is probably no different, because there have been savings in pay increases and recruitment costs.

Elsewhere, expected growth in demand for IT contract staff has led jobs company Spring to launch an offer under which people who work for its clients for 464 days out of the next 1,000 can buy 5,000 shares at the end of that period at a heavily discounted rate of £1.90 - they are currently about £3.45.

"Contractors have told us they want to be partners, not just names on the database," says chief executive Karl Chapman.

Only 10% of medium and large UK companies offer flexible benefits packages of this type and just 15% have plans for such schemes in the next two years, according to research by payroll and personnel processing bureau Centrefile.

The main reason is company culture and structure.

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