Thinking about your employee stock purchase plan (ESPP) and how appropriately it aligns with your company objectives is important to consider. Many companies offer an ESPP as part of employee compensation packages. It's absolutely a step in the right direction to attract and retain top talent. In fact, it's been proven that employees with ownership in their company through an ESPP tend to work harder, take less unplanned days off, plan for long term employment and offer employment recommendations to their peers. Your employee participation is likely in a good position. But is good, good enough?
Focusing on your people priorities means thinking about new ways to engage more employees and increase participation in your ESPP. But how? Take fractional shares for example. It's exactly what it sounds like — less than one share of a company stock. And although the idea of offering fractional shares is not a new concept, it hasn't been widely used in practice yet. Fractional shares are often overlooked by employers simply because they aren't aware of the tremendous value that fractional shares offer.
With stock purchase programs going through a new era of appreciation and plenty of employees out there who want to participate in these plans, now is the perfect time to consider introducing fractional share purchases into your program. And, here's just some of the way it can advance your talent strategy:
- ESPPs are a savings vehicle and an opportunity to invest in the market. If your employees have allocated money to the company's stock purchase plan as an investment, that money should always be invested precisely the way they intended. In other words, fractional share purchases allow participants to put every penny they contribute into the plan towards the purchase of their own piece of ownership in the company. They are immediately able to transact on any fraction of a share (or shares) they own.
- Fractional shares add up over time. The sum of the shares can translate into hundreds, if not thousands of dollars into your employee's pockets each year. That can mean the difference between financial success and living paycheck-to-paycheck. Investing builds wealth; holding cash does not. With a fractional share offering your employees money is put to work right away, not just collecting dust somewhere.
- Many of the best performing stocks are trading in at high dollar values. Employees can perceive full shares as being too expensive. A high value stock price is a good thing but not if it means participating in your ESPP becomes inaccessible to most people.. Fractional shares offer flexibility to the average employee by giving them the power to decide what they can afford. Whether it's $10 or $1,000 you're providing your employees ownership possibilities that may not have existed through your standard ESPP offering.
- Fractional share purchases add up over time. With a consistent schedule of purchasing fractional shares employees will eventually own whole shares. Even though fractional shares allow for immediate transacting and ownership, your employees will get a sense of personal satisfaction knowing they have contributed enough money to start seeing whole shares in their portfolio. If a company pays dividends on fractional shares and offers a dividend reinvestment opportunity employees take advantage of, share ownership increases further and adds up even faster!
- Overlooked company benefits. Often enough, companies that could benefit the most from offering a fractional share plan are the same companies who don't offer it. It's true; fractional shares offer a rainbow of benefits, and generally, with a few easy tweaks to your plan, coupled with the right provider, you can add fractional share purchases to your ESPP right away. And, it's simpler to manage. With a fractional share plan you eliminate the need to manage residual ESPP contributions following each purchase giving you time back in your day to focus on your people priorities.
No matter your stock price today making participation in your ESPP affordable through fractional shares offers an incredible value to you and a great earning opportunity for your employees.
Think your company could benefit from offering fractional shares on your ESPP? As a leader in the industry, Computershare manages ESPPs for clients who offer full share, fractional share, and/or both under their plan and we can help you get up and running in no time.
Visit us at computershare.com/espp-us to learn more or fill out the form below to speak to one of our ESPP solution experts.