Boosting Employee Engagement and Retention with ESPPs: A Growing Trend
More and more companies are offering ESPPs to increase employee engagement, boost retention rates, and create a culture of ownership. ESPPs are a way for employees to invest in their company's success and benefit from its growth. As part of your total compensation package, is your ESPP as competitive as it could be? With so many choices, today’s top talent expects more from an overall employee compensation plan. In fact, The Society for Human Resource Management (SHRM) reported that ESPPs offering a 15 percent discount with a look-back feature2, have a participation rate of 44 percent -- well above participation rates for plans that offer lower discounts or no look-back.
Millennials and Gen Z Want a Superior ESPP
Millennials and Generation Z are among the most insistent on a good ESPP3. So having a superior plan that is skillfully communicated and expertly administered provides big advantages for companies that want to attract and retain the best talent possible.
Your company’s stock ownership plan can provide an invaluable tool for younger generations to meet their financial goals. Furthermore, providing education about the importance of long-term investing and how an ESPP fits into that puzzle can have a positive impact on your company growth.
Unlocking the Value of ESPPs: Educating Employees for Growth
Do not assume that your ESPP offering (or long-term investing in general) is easy to understand or is common practice. Clearly explain to your employees how your ESPP is complementary to retirement savings. Ensure candidates know your ESPP provides an additional savings option that can easily be liquidated down the road. Providing context around the long-term value of your ESPP could be the deciding factor for a candidate as they weigh multiple employment opportunities.
Maximizing ESPP Awareness and Participation: Year-Round Engagement Strategies
As many Gen Z employees may be new to the workforce or your organization and will need to learn more about ESPPs. A meaningful, year-round campaign will increase your ESPP participation, as you educate your employees on the value of a stock program – and how it differs from a 401(k).
Here are some ideas on how you can educate and engage your employees and keep your ESPP top of mind all the time – not just during the enrollment period:
• Engage your ESPP provider to educate employees on your unique offering and why it is an important component of their benefit package.
• Provide materials that explain the difference between your ESPP and 401(k), and how they can participate in and benefit from both of these investment vehicles. For instance, an ESPP can be used for short-term life events like buying a home, while a 401(k) for long-term retirement goals.
• Partner with a financial advisor to host webinars or lunch-and-learns on the importance of investing.
• Post information on the main page of your company website.
• Create short tutorial videos covering a range of investing topics, including explanations of your plan’s look-back provision, stock match or purchase discount features.
• Create a video of company leadership talking about why your company offers these benefits.
Optimizing Your ESPP: Reevaluating and Improving Effectiveness
It may be time to reevaluate your plan and consult with your plan administrator about how your ESPP could be more effective. If participation is low, maybe there is a long restriction period or your discount is not appealing enough – and do you offer look-back pricing?
Engaging Young Investors with ESPPs
A superior ESPP offers an opportunity to engage with younger investors, who follow stories and themes. Building narratives in digital channels can engage these potential shareholders – especially when you keep them aware of things they care about, like ESG processes and results.
ESPPs and Leveraging Ownership for Retention
With 494 percent of the S&P 500 companies and 38.55 percent of Russell 3000 companies offering ESPPs to their employees, competition for top talent is fierce. By offering the opportunity to participate in the company's ownership, employees may feel more loyal and invested in the company's success. This can lead to higher retention rates and reduce the cost of turnover.
EQ: Empowering Companies and Employees with Equity Compensation Services
As a company that truly understands the value of equity ownership, we are here to help you take stock of your most valuable assets… your employees. EQ provides equity compensation services to include equity awards, Restricted Stock Units (RSUs), and employee stock purchase plans (ESPP).
2 A lookback feature in ESPPs is a provision that allows employees to purchase company stock at a discount based on a predetermined formula. The purchase price is determined by looking at either if the stock price purchased at the beginning of the offering period is lower than if the stock priced purchased at the end of the purchase period. Employees would have the opportunity to purchase the company stock at a more favorable price.
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