Global employee equity plan provider Computershare has created a 10-point blueprint for companies looking to roll out an Employee Stock Purchase Plan
by Sheila Frierson is President, Plan Managers, NA, at global equity plan provider Computershare
Global employee equity plan provider Computershare has created a 10-point blueprint for companies looking to roll out an Employee Stock Purchase Plan (ESPP).
Companies are increasingly turning to ESPPs as a way of rewarding and motivating their global workforce during the coronavirus pandemic.
As well as encouraging employees to save at regular intervals during uncertain times and providing access to equity, often at a discount, ESPPs also engender greater employee loyalty, innovation and alignment with the company’s goals, which in turn supports companies during difficult periods.
Companies looking to offer an ESPP for the first time should seek out expert insight to understand how an ESPP can work for them, as well as best practice guidance on how to set one up.
Below are the organization’s 10 key steps for creating, building and maintaining an ESPP:
1. Determine the plan’s purpose
Defining goals at the outset will guide the selection and design of an ESPP. The most common reasons for offering ESPPs include retaining talent in a competitive market, boosting loyalty as well as increasing employee motivation, morale and production.
2. Conduct external and internal research
Understanding how a proposed plan compares to the rest of the market – as well as what employees and internal stakeholders want from a program – will enable a company to tailor features to best meet its needs.
3. Establish a budget
It is crucial to understand budget constraints early on in the ESPP planning process. Companies should also factor in set-up fees such as those for administration and communications, as well as costs associated with tax reporting and filing.
4. Pick the right components for the company
Variable ESPP design elements include:
- Plan type (for example whether it is tax qualified or non-qualified)
- The proportion of employee share discount or matching shares
- The offering and purchase frequency
- Amount and type of shares to fund the plan (e.g. treasury, open market, authorized/unissued)
The right combination will incentivize employees and will boost engagement and productivity.
5. Seek stakeholder buy-in
Support from internal stakeholders, including finance, payroll, human resources and senior managers, is crucial to a successful ESPP implementation. Involving these groups early may reveal unknown roadblocks and opportunities and give the team the chance to refine the proposal before presenting it to senior management or the board of directors.
6. Prepare early for shareholder approval
Companies must usually seek shareholder approval for every new employee benefit plan that offers equity to company officers, directors, employees or consultants. It is critical that organizations build in enough time to seek and secure shareholder support.
7. Select a provider
For a successful long-term ESPP, companies should select a financially-solid partner that has industry experience and a client-focused approach. They should also weigh up how user-friendly their systems are and pay close attention to feedback from customers.
8. Create a robust implementation plan
Following a project plan and timeline with clear milestones can help ensure the ESPP launch goes smoothly. This includes establishing a database and administrative platform as well as making sure that systems integrate fully with those used by payroll and human resources and for the plan’s website. Companies should also ensure that employees responsible for rolling out the program have received all the right training.
9. Keep communicating
Creating a communications strategy can help companies keep employees regularly informed about the plan and how to take part. Messages can be tailored to suit different demographics and align with the business’s goals. Companies should consider all available channels, including video, blogs, social media and town hall meetings, and develop unique streams to target specific groups.
10. Keep evaluating
Companies should undertake periodic reviews to ensure their ESPP continues to meet the objectives of the business and employees’ needs. They should feed this information into an ongoing communications schedule to target improvements.