The administrative cost of a plan can vary greatly based on complexity and plan type.
Where are your employees located?
Is your employee base domestic only or global?
Where does administration happen?
Do you have the internal resources to administer in-house or are you partnering with an outside vendor?
Outside resources to help design and maintain ESPP. Very important internationally.
This can be large factor in both the overall cost of your ESPP and it's success.
Share and Governance Costs
One final area that hasn't yet been factored into the ESPP cost equation: corporate governance considerations.
Proxy advisory firms, like ISS (Institutional Shareholder Services) and Glass Lewis, generally support ESPP programs with very few exceptions. Formulating an ESPP proposal and/or developing an effective strategy for obtaining shareholder approval of an ESPP proposal is a relatively straightforward exercise and can generally be done without any excessive legal or registration costs.
As illustrated in the diagram below, a best practice recommendation is to complete an analysis of your top 15 shareholders anytime you are looking to put a plan vote to shareholders, including your ESPP. This will ensure that you understand how your shareholders are voting and which proxy advisory firms they follow when the plan is up for vote, and avoid any surprises.
An ESPP is an incredibly useful tool to recruit and retain staff, and I think we can all agree that most employers would prefer to offer their employees the best possible selection of benefits under their plan. However, few companies are so profitable and indifferent to expenses that they can afford to disregard costs. Therefore, understanding the true costs of the ESPP upfront will allow you to design and plan an ESPP that can be the most effective and successful, and at your price point.
Need help with your ESPP plan design? Whether you're looking to launch a new ESPP or trying to improve the value of the one you have, we can help. Visit us at computershare.com/employeeplans to learn more.