ESOP focus: Recruitment and retention in a challenging business environment

Persistent labour shortages in high demand industries can underscore the need for companies to leave no stone unturned in the ongoing mission to attract and retain employees who can make a positive difference.

In an ultra-competitive recruitment environment, businesses know that competitors may attempt to headhunt top talent, while replacing people can prove challenging.

In addition, with the global economic outlook remaining uncertain, many companies may exercise caution in recruitment and/or reducing headcount where necessary.

Companies may need to be more careful in their recruitment but still want to attract the best candidates for key open positions, while also keeping a strong focus on how they can retain staff and encourage existing employees to excel on a day-to-day basis.

Employee share ownership

Embracing employee share ownership plans (ESOPs) is one way companies can look to give themselves an edge in the current environment. Equity-based incentives can prove lucrative over time for employees and an attractive plan can help a business to achieve key goals such as bringing new talent in, retaining key personnel, and encouraging excellent performance.

Speaking with J.P Morgan Workplace Solutions, , Joanna Phillips, Vice President, ESOP Builders, emphasized that employee ownership can be a good fit right across the business spectrum, with one of the key considerations being to choose the correct plan for your circumstances and what you are hoping to achieve.

“In general, ESOPs can work for a wide variety of industries and for many different company sizes. But, you do want to identify what the right plan structure is going to be for your company. It’s definitely not a one-size-fits-all,” she said.

Once an owner is clear on what they want to achieve with their employee share plan, that will guide how the process unfolds from there.

Tips for plan design

“The owner’s goals are going to help drive what the design of a plan looks like. Does the owner prioritize their own exit, employee engagement and ownership culture, or attraction and retention? You might go more towards a stock option type of plan as a way to reward employees’ effort and commitment, or you might have a direct purchase plan, where the employees invest and become owners right away. You might even have a combination. Overall, you want to make sure that it is attractive for their participation and that it’s easily accessible, especially if it’s a broad-based program, where you want the majority of people to participate,” Joanna said.

She pointed to possible benefits that can flow to companies when they offer an attractive plan that encourages employees to sign up and commit to the business beyond the short-term.

“You’re retaining talent, but you’re also keeping those people away from your competitors. There’s a double benefit in that. Also, think about the cost and effort involved in attracting people and then training and developing them. You can make the most of that when you implement some sort of employee ownership plan that helps make them happy to stay where they are for the long haul,” she said.

Joanna also stressed that companies must not lose sight of the need to make ESOPs attractive to their people, as the positive outcomes referred to above can only be achieved if high participation rates are secured.

“If you propose something that employees don’t look at favourably, they’re going to decide not to participate in it. So, when it comes to making your plan attractive, that means making it easily accessible, especially if it’s a broad-based programme where you want the majority of people to sign up. Everyone is going to be at different stages of their career, in their life, in their general situations, so making it easily accessible, through flexibility in share purchase or flexibility in participation, depending upon how your plan is structured, is going to be important,” she said.

Joanna added that there are many other points to be considered before unveiling a plan to your people, e.g., rules on eligibility, what happens when someone leaves the company, and making sure that pre-enrolment communications outline all relevant scenarios that may impact on participating individuals during the lifetime of the plan.

What next?

When you consider the potential benefits employee equity compensation can bring as a way to motivate your employees to perform, you can see how this could help to not only promote retention and engagement, but also have positive knock-on effects in terms of productivity and growth.

Workplace Solutions is a tech and service-based offering, created to empower your teams to easily navigate their workplace incentives with confidence. Our intuitive platform helps you attract and keep the talented people who believe in your company as much as you believe in them.

If you want to explore the possibilities around employee share plans for your business, contact us today and speak to our experienced team.

All companies referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by J.P. Morgan in this context.  

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