Employee Share Ownership Plans: Introductory ‘Why’s’ and ‘How’s’

Employee Share Ownership Plans: Introductory ‘Why’s’ and ‘How’s’

Introduction

It’s been called “the Great Resignation” or “the Big Quit.” Over the last year or so, employees all over the world have been quitting their jobs in record numbers, mostly in the United States. As we see it, the problem can be summarised in a few words:  Employees aren’t happy, motivated and satisfied.

So the question now is, “What can I do as an employer to keep my employees from leaving over and above salaries and nice-to-have contract inclusions?”  Below are some ideas that you can use in your business to not only keep your employees but also make them happy and smile. As you can see, though, the days of incentivising your employees with things like in-house amenities, catered lunches, and days where you can bring your pet to the office are quickly becoming a thing of the past.

Employee Share Option Plans (ESOP)

A great way to make sure your employees care about the growth and future of your company is to give them a way to get a piece of the action. The thought of giving away valuable equity may make you feel shocked and disgusted. But keep these things in mind: You may not be able to get back the money you give away.

If you want to make these plans work for you and your business, there are a lot of ways to do so. You don’t have to give your employees actual ownership of the company, or give them any power to make decisions for the company (if you don’t want to). These plans are often structured in the form of giving your employees share options, which can be exercised under certain conditions (that you can determine).

This can also happen if the employee leaves before they can exercise their options (or before they are given to them in any other way that you choose). The employee loses their right to the options.

There are “Phantom share schemes.”

Phantom Share Schemes can be a little more flexible because they are made up of a contract between the company and the employee. Because this is a contract, you can decide how the Phantom Shares are valued. Often, these Phantom Shares are linked to the value of the company’s shares (or the Board of Directors). It can also include non-monetary benefits for employees who take part in the Scheme (like additional leave days, different perks at work, or literally anything else you can think of).

People who make money get a share i.e. Profit Sharing

Easy: This one can be done in a hundred different ways. This is a way for you to give your employees extra money. It’s especially good for people who work in sales. They would get a percentage of any sales they make in which they are the “effective cause.” You can set that percentage, either as a fixed percentage or on a sliding scale (i.e. they were the driving force behind the sale and successfully managed to convert the sale from a lead to actual revenue).

While this is a simple idea in theory, implementing it can be difficult because there are many things to think about, like how the sliding scale would work, how profit is calculated (is it gross or net profit? How are those calculated in relation to your business), and how and when the employee will get paid for profit share that they’ve earned.

Additional annual leave for the year

Adding more days to your annual leave is another one that’s easy to understand but hard to put into place. This means that you’re paying your employees more because they’re on leave, but they’re still getting paid for their time off. The structure of this is very important, because you don’t want those extra leave days to be taken into account, for example, when the employee’s employment with the company comes to a leave.

Conclusion

You can use the methods of incentivising your employees above to make sure that your employees stay at your company and don’t look for “greener grass” on the other side. At Lacoona, we can help you set up any of these structures. There are no hidden costs, just you and Lacoona.