Employee benefits have grown far beyond simple reimbursement packages such as health insurance and big salaries. An increasingly preferred means of motivating the employee is by offering them a piece of the company. The stakes get higher when it’s your business on the line. And this line of thinking has the subtle yet effective means of driving up worker productivity.
Don’t just restrict these stock options for bigwigs high up on the corporate ladder, rather give opportunities to everyone, down from the lowest level worker to the highest. When everyone chips in to pull their weight, the company will experience spontaneous success. Your company’s own stock value would also skyrocket instead of plunging into the ground helplessly.
Stocks are much more valuable than your average bonuses and even appraisals. That extra commitment which you want from your employee can only be extracted if they have something riding on the line as well.
What used to be a hallmark of formidably large businesses is now becoming a common staple of both small and medium sized businesses.
If an employee gets an option on 200 shares at $5 and the stock price climbs up to $20, then the employee has the right to purchase their 200 stocks at the $5 value and then sell them for $20.
Careful though, there is a clear difference between Employee Stock Ownership Plan (ESOP) and stock options.
Here’s the watered down definition of the two most common ones:
ESOP
ESOP, if set up in accordance with the rules can allow your company to qualify for tax benefits. The company sets up a trust fund for the employees, contributes cash to the trust which would then be used to purchase said stocks. The trust can also borrow the money from banks to fill their coffers.
Once the shares have been acquired, they are distributed to all the employees.
Stock options
Stock options allow the employee to purchase the stocks at their own discretion, during a specified time and fixed price. This way when the stock price climbs up, they can qualify to purchase it at the previous fixed price and sell it at the market value to retain the difference.
Here are some two key advantages distributing stocks
Retain employees!
Employers are all too aware about the extra costs of hiring and training a new recruit once an older, experienced veteran decides to hunt for greener pastures. Offering valuable stock options provides that much needed incentive to invest more of their time in your company. If not much, stocks almost guarantee that employees will remain employed with your company for at least the interim between when the stocks are purchased and sold.
Increase their determination!
Employees know that the company’s stock value is directly dependent on their productivity. So they pull extra weight to contribute to its success. No amount of pep talk or slap on the back can make up for their personal stake. It is a proven fact.
Even better if the stocks are sold at a discount, while this entails lost opportunity for not having sold the stocks at the market value, the benefits more than make up for the temporary loss.
To learn more about a concise stock program, contact consultants at JS Benefits for specially designed solutions for your business architecture
