Many of us have been humbled by the selfless work of grocery store workers and other essential workers such as delivery drivers during the COVID-19 pandemic.
Speaking to our clients, we know that many businesses in the retail and logistics sectors are actively looking at ways to help front-line and hourly paid staff, many of whom are experiencing difficult working conditions and a greater impact on their finances as a result of the pandemic. Companies also want to ensure that employees continue to feel valued and appreciated during this very difficult period.
Wage increases, cash bonuses and additional paid time off (PTO) can provide short-term motivation and help retain employees during tough times, but many companies are also looking for ways to reduce their own spending.
Employee stock purchase plans (ESPPs) are one way companies can support essential employees and encourage long-term business success while the pandemic is creating financial complications for both employers and their staff.
In a report Computershare produced in partnership with Infinite Equity, Elizabeth Stoudt, partner at Infinite Equity, emphasizes the benefits of employees having equal access to shares: “Losing essential employees because they feel undervalued means companies lose skills and experience from their workforce and must spend time and resources on hiring and training. Granting equity instead of cash-based incentives is more cost effective and enables companies to focus cash on other expenses while also helping retention and engagement by ensuring employees feel valued.”
If your company is considering how best to reward front-line workers through employee shares, first assess the following five factors:
1: Understand the best type of reward plan for your employee base: Non-qualified employee stock purchase plans with an employer match typically enable employees to purchase shares after income tax. Such plans have fewer restrictions on their structure, because they are not affected by tax rules or regulations around eligibility. As a result, companies can design them in a way that targets specific employees, enabling them to focus on essential workers who are more likely to work hourly or have a lower wage base. Fractional share plans enable employees who would otherwise struggle to buy a whole share at purchase to participate in the plan. Cashless participation plans also enable hourly or lower paid workers with little or no disposable income to build up equity.
2: Use internal benchmarking and research pay and equity among competitors: Companies may benefit from additional internal pay or equity analyses, which can help ensure employees receive the right levels of compensation. Researching the approach of competitors can also help companies better understand the right compensation model.
3: Be aware of the financial effects of any changes: Any modeling or planning should anticipate the effect of equity awards or bonuses on the business. It may be easier and more efficient to approve additional shares or a new share plan than other incentive programs.
4: Understand the mechanisms for distributing awards: Companies should design award plans in a way that ensures they meet any expectations they have created among employees over annual grant timings. Delays and access issues can erode employee trust, particularly during difficult times, and undo the sense of goodwill that the plan was designed to create.
5: Be sensitive to perceptions over fairness: Unveiling comparatively lucrative packages for senior executives at the same time as announcing changes to share plans for other employees can damage employee relations. Full value equity awards, which level out the differences between executives and employees, can help create a mutual culture of share ownership.
Sheila Frierson is president, Plan Managers, U.S., at global equity plan provider Computershare.This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of Institutional Shareholder Services or its affiliates.
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