Business leaders and the unions have given their backing to government plans to increase the number of employees who have shares in their company - but warned it had risks as the Railtrack fiasco had shown.

Chancellor Gordon Brown launched the share incentive plan on Monday, describing it as a "key component" of his plans to boost the UK's productivity.

The re-launched scheme, part of the Finance Act 2000, allows companies to offer free shares of up to £3000 to their staff and the opportunity to buy up to £1500 of "partnership shares" out of pre-tax and NIC pay. Brown hopes the stakeholder ideal will motivate the workforce and boost productivity levels.

Ministers admit they face a difficult task in selling the scheme to sceptical workers because of the current economic uncertainty and events of recent weeks. Insiders at the Inland Revenue admitted the announcement had been delayed for two weeks due to the Railtrack bankruptcy which has left thousands of employees who bought shares on the company with nothing.

The chancellor claimed the scheme had already been proved to work.

"Research in the US and UK has shown clearly the link between employee share ownership and increased productivity, and there is no better incentive for employees than for their work to be recognised and for them to share in their firm's success. Evidence shows that employee commitment is a vital strength of companies, with these consistently out-performing their competitors in the global economy," he said.

CBI chief Digby Jones gave his support to Gordon Brown's initiative but the CBI cautioned that Railtrack showed buying shares was not risk-free.

"Employee share ownership can be an invaluable tool for giving employees a direct stake in the business, improving employee involvement and boosting productivity."

A CBI spokesman warned that employers should read the small print and remember the legal maxim "buyer beware".

"Employers have to be made aware that there is a risk attached. It's not as safe as putting your money in the building society - share prices can go down as well as up. That said they should not be put off of taking part in the scheme," he said.

A spokesman for the TUC admitted it had "reservations" over shareholder schemes but backed the government's announcement, saying Railtrack was an exception to the rule.

"There are problems with the Railtrack scheme but it is a separate issue. The unions are in talks with the government about what happens to the Railtrack staff who invested in the company. We have got reservations about shareholder schemes but the Railtrack issues are no reason not to support a good scheme," he said.

TUC leader John Monks said employees had a right to a recognition of their efforts.

"Employees deserve a share in the financial success of their company. And employee share ownership, when combined with other measures to promote employee involvement, can boost company involvement," he said.