The road to truly excellent business performance is not well-paved by financial incentives alone. It includes taking responsible care of employees‘ needs for both physical and emotional safety.
With the right corporate structures in place, your company can maximize employee productivity and efficiency, creating a more valuable, sustainable organization for everyone involved. One such structure exists in an ESOP (Employee Share Ownership Plan).
What are ESOPs?
A stock ownership plan held by a group of employees is called an ESOP. A company’s management sets up this type of plan and hires a trustee who will handle the sale or purchase of the parent company’s shares on behalf of the trust. The participants then elect representatives to sit on that board with their trustees.
ESOPs are more common in larger companies that offer employees more flexibility regarding the number of shares afforded to them through the trust and how long they hold onto their stocks before selling or redeeming them (if at all).
There is no requirement for an ESOP to be held by a specific group within a company; however, it is usually reserved for senior-level managers and executives.
5 Benefits of ESOPs
Every company has its unique style for creating and sustaining strong business relationships with employees. However, ESOPs can provide your organization with an immediate competitive advantage in the following ways:
1) Better Retention Rate
With employee stock ownership plans in place, your workers become vested participants in their success as a business. This unique perspective as both an employee and shareholder leaves them with greater job satisfaction as they feel like their contribution is more valued.
Employees who feel like they are not making a difference in the company’s success will be less likely to maintain their employment over time; however, those that can see themselves working towards a common goal tend to stay (and contribute) for longer periods.
2) More Supportive Team Environment
One of the biggest contributors to overall workplace productivity and morale is the support received from fellow employees throughout the organization.
An ESOP fosters this team mentality because it provides employees with solid incentives, which encourages better cooperation between staff members at all levels-from management and even part-time staff.
3) Better Work/Life Balance
ESOPs are beneficial for the individual, as well as for the organization overall. Employees who are satisfied with how they are being treated will be less likely to take their issues outside of work, whether seeking help from other resources or venting about managers and other coworkers behind closed doors.
This contributes directly to lower absenteeism rates among employees, leading to a more positive organizational culture all around.
4) Increased Employee Engagement
It’s no secret that living costs in America are high, thanks to mounting student loans, credit card debt, and healthcare costs. It also includes skyrocketing housing prices which have forced people out of markets where they can afford homes at all. As a result, employees are more likely to feel insecure when faced with these financial burdens that can affect personal lives and relationships.
ESOP can help reduce this stress by reducing the amount of money the employee must be paid to have enough disposable income for things like groceries, medical bills, or rent/mortgage amounts.
The plan allows workers to save up money using the Employee Stock Ownership Plan so they will eventually have enough liquidity at retirement to purchase homes or send children to college without taking on additional loans. This could potentially cripple them financially well into old age, not to mention having enough liquid capital to reenter the workforce if need be. It is another reason why companies with an ESOP tend to retain more workers over a longer time.
5) Higher Profits
Businesses need to have employees who provide outstanding customer service and marketing campaigns that bring in potential buyers from all corners of the world in today’s market.
It is also essential to have a team of individuals who understand how finances work to treat customers with respect while simultaneously ensuring that profits grow on an annual basis; without these factors, most companies would be lucky to stay afloat for more than three years.
When your ESOP helps employees manage their personal finances better by making intelligent choices about investments (which often include buying stock in the company), that will lead directly to increased profitability which can then be allotted back to the staff.
ESOPs are also beneficial for other employees because it provides them with an opportunity to have a stake in their organization, but there are other benefits. The plan works by transferring ownership of company stock to all eligible employees who can retain these assets or sell them back to the business at some future date which is usually after retirement age.