Employee stock purchase plans (ESPPs) offer great value to employees and help companies broaden their ownership culture. The most favorable plans offer a look-back and a 15% discount, yet according to a recent Fidelity survey, average ESPP participation is just 29%.
Why? One theory is fear of the unknown. For many employees, an ESPP appears to be just another draw on disposable income, but you can alleviate that anxiety by being as transparent about the program as possible – communicating early and often.
Be sure to employ a mix of communication vehicles in your strategy (lunch and learns, an email series, short explainer videos, etc.) and cover the specifics in detail. Here is a list to get you started:
- Discuss how the plan ties into your company’s ownership culture
- Detail how the plan works—do not assume previous knowledge
- Look-back provision
- Discount – provide a real-life example
- Holding period – if applicable
- Describe the enrollment process in detail
- Minimum and maximum contributions
- Be specific about the employee's responsibilities (e.g., “All you need to do is…..")
- Explain the ease of purchasing shares
- Let a recent participant share their story
- Review tax considerations at a high level
- Clearly identify actions that are allowed once the enrollment is closed
- When and how are contribution changes made?
- Withdraw and/or suspend allowed?
- What happens in the case of terminations/LOA/death?
- Be specific about what happens at the time of purchase
- Where will my shares be deposited?
- Will there be a fee/commission?
- Can participants sell right away?
Finally, put these materials into a packet so employees can take it home and share the decision-making process - and always have an open door policy for asking questions. Make sure to address these points with company employees early and often. When developing the communication strategy for a broad-based plan like an ESPP, make no assumptions of prior knowledge. For many folks, this is their first experience with company stock – and that can be scary.
For more ESPP tips, sign up for our webinar, Paving the Way Toward ESPP Success this Thursday at 11am PT with Denise Scoville-Glackin, CEP, and Emily Cervino, CEP.