An Employee Share Purchase Plan (ESPP) is a broad-based share plan, that enables employees to purchase company shares through salary deductions, with many companies generally providing matching benefits as an incentive to participate.
Companies are increasingly turning to ESPPs as a way of rewarding and motivating their global workforce, as well as encouraging employees to save regularly and providing access to equity. ESPPs also create greater employee loyalty, encourage innovation and engender alignment with the company's strategic goals.
Below are our nine key steps for creating, building and maintaining an effective ESPP.
Determine your share plan's purpose
The most important step when setting up an ESPP is defining your goals. This will impact the selection and design of your ESPP. What do you want your share plan to do for your business? Among the most common share plan goals that companies set are: attracting and retaining talent in a competitive market, generating greater loyalty and engagement, increasing employee motivation, and boosting morale or productivity.
Undertake a discovery process
Understanding how your proposed share plan compares to the rest of the market – as well as what your employees and internal stakeholders want from the plan– will enable your company to tailor features to best meet its needs. Computershare uses our industry expertise to help companies create successful long-term ESPPs, guides them through the discovery process and the entire plan lifecycle.
Establish your share plan budget
It is crucial to understand any budget constraints early in the ESPP planning process. You will need to consider the cost of your company matching contribution, as well as costs associated with administration, communication, due diligence research, custody setup and tax reporting and filing. Computershare proudly provides a completely transparent cost structure to help you budget with confidence and avoid bill shock.
Select the right components
The right combination of share plan components will incentivise your employees, boost engagement and heighten productivity. Below are examples of some variable ESPP design elements:
- Plan type (e.g. pre or post tax)
- Company matching component
- Minimum and maximum plan limit (e.g. dollar amount)
- Offer and enrolment periods
- Payroll deductions and purchase frequency
- Quantity and source of shares (e.g. purchase on-market or issue new shares)
- Vesting period
- Forfeiture consideration for the company component
- Dividend considerations
Seek stakeholder buy-in
Support from internal stakeholders, including legal, finance, payroll/tax or human resources, is crucial to successful ESPP implementation. Involving these stakeholder groups early in the process may reveal unidentified roadblocks and opportunities and gives the team the opportunity to refine the proposal before presenting it to the executive leadership team or the board.
Create a robust implementation plan
Computershare plays a key role in helping you successfully implement your employee share plan. We help you create and fully understand your project plan, including a robust timeline with clear milestones. This includes, establishing a database and administrative platform as well as making sure that all systems fully integrate with payroll and human resources.
Deliver a successful, engaging offer
From an administration point of view, launching an accurate, timely offer is crucial. From establishing your eligible population to signing off on your final participant population EquatePlus ensures accuracy and simplicity every step of the way. The participant experience is just as simple. The platform is user friendly and intuitive, meaning it's easier than ever for participants to enrol at any time, whether they're at home or on the go.
Continue communicating with participants
Creating a communications strategy can help companies keep employees regularly informed about the plan and how to take part. Messages can be tailored to suit different demographics and align with the business's goals. Companies should consider all available channels, including video, blogs, social media and town hall meetings, and develop unique streams to target specific groups.
Be open to evolution
Companies should undertake periodic ESPP reviews to ensure it continues to align with both your company's strategic goals and your employees' needs. It's important to stay across industry changes and trends that can help you take your employee share plan offering from good, to great. And with a partner like Computershare, you can be flexible and make informed changes that support the longevity of your plan.
Wherever you are on your employee share plan journey, Computershare can help you choose the right ESPP approach for your company. We can help you understand the benefits an ESPP can provide for your business, as well as use best practice insights to help get you started.