When companies develop benefit packages for employees, they have to consider the right mix of what to offer. These days, offering benefits like a 401(k), medical and dental insurance are almost expected, especially among companies of a certain size. But what about the employee stock purchase plan, or ESPP? According to surveys conducted by the National Association of Stock Plan Professionals (NASPP), 52 percent of U.S. companies offer an ESPP.
This article is for the other 48 percent.
If your company is among that 48 percent, you should know there are several good reasons to offer an ESPP to employees. Here are nine reasons why.1. Better employee performance
We conducted a study in conjunction with the London School of Economics
to determine if there was a difference in employee performance among those who participate in an ESPP versus those who do not. We found that those who participate in an ESPP:
- work longer hours
- are absent less frequently
- are less likely to quit
- express greater job satisfaction
In other words, offering an ESPP can lead to a better, more engaged, more valuable workforce.2. Attract and recruit top talent
Other benefits like a 401(k) and medical insurance are baseline benefits that hardly make you competitive among likely job candidates. But for the moment, only half of all public companies offer an ESPP. Offering one could make your company more attractive and help you land top recruits.3. Create an ownership culture in your company
An ESPP is the easiest and often the most cost-effective way for employees to purchase shares in the company. When employees are also owners, they have a greater stake in the success of the company, which can be a powerful motivator.4. ESPPs are a broad-based, cross-border benefit
An ESPP is one of the few benefits that can be made available to all employees, including employees in countries outside the U.S.5. Raise capital
The regular payroll deductions from participating employees provides a steady cash flow to the company.6. Lower expense than other equity compensation
On a per share basis, ESPPs generally have a lower valuation than other forms of equity compensation. Setting limits on share purchases can also lower the compensation expense.7. Corporate tax deductions
If you offer a discount on ESPP purchases, your company can take a deduction on the discount portion for any disqualified disposition for a Section 423 plan and upon all purchases for a non-Section 423 plan.8. ESPPs can increase employee savings
Savings rates in the U.S. continue to be a problem. But with its regular, automatic payroll deductions and share purchases, an ESPP can help employees to save more. And they can easily access that capital when the need arises.9. An ESPP can substitute for another (more expensive) employee benefit
In some cases, offering an ESPP can be a more cost-effective benefit to offer employees than other more common benefits that are simply cost prohibitive. For instance, some retail companies offer employees an ESPP rather than an employee merchandise discount.
Ready to start your own ESPP?
Computershare administers employee stock purchase plans for hundreds of companies all around the world. To learn more about our services, visit us at computershare.com/employeeplans
. Then contact us at email@example.com
or 888 404 6333 to schedule a complimentary demonstration of our solution.
NASPP Domestic Stock Plan Administration Survey (2014) Computershare Share Plan Survey
CORRECTION: an earlier version of this article implied a corporate tax deduction could be taken on any disqualifying disposition for Section 423 plan and any purchase for a non-Section 423 plan. Only the discount portion is tax deductible in these situations. The article above has been corrected.