By Jo Best, 19 September 2006 16:50
NEWS
Nothing says dot-com or tech start-up like stock options and share schemes but perks could be threatened by changes in the finance industry.
According to PricewaterhouseCoopers (PwC), the advent of International Financial Reporting Standard 2 (IFRS2) - which saw all share options, not just discounted ones, granted after November 2002 deducted from a company's profit - has meant generous employers have seen their bottom line hit drastically.
And, says the accounting company, tech organisations have borne the brunt of IFRS2, with profits dropping 12 per cent in the year since its adoption - while telecoms companies have escaped the IFRS2 knife, seeing profits curbed by around two per cent. The average across all industries is just one per cent.
Graeme Ward-Thompson, reward and compensation partner at PwC, said there are two main reasons why tech businesses are suffering the most.
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He told silicon.com: "In the technology sector, stock options are used to incentivise and keep staff. Companies often have little by way of cash but they do have equity. [Technology companies] tend to grant more options and secondly their profits tend to be lower."
But, says PwC, it's not as bad as it seems and employees need not necessarily be deprived of their perks - by tweaking which type of offering they use, such as swapping a save-as-you-earn scheme for a personal income tax deduction one, staff can still get a bonus while employers need not worry their accountants unnecessarily.
The consultancy suggests that technology companies should undertake a cost-benefit analysis to make sure they get the best out of their share schemes.
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