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Financial Wellness and Equity Compensation: Why Education is Central to Success

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As an employer, helping your employees to look after their financial wellness extends a lot further than simply making sure they are being paid a good, living wage.

Financial wellness is the ability someone has to meet both their current and future financial obligations, while also taking into consideration how secure they feel about their financial future. So employers who enhance their employees’ remuneration packages with access to other benefits – such as pensions, health insurance or equity compensation, can really make a difference.

Employees, of course, generally favor employers who look after them and will actively seek these out. In turn it’s also widely acknowledged that companies who value their staff and treat them well will most often reap the benefits through loyalty, retention and dedication.

One area that can truly create a sense of purpose and ownership for all employees, no matter their age, gender or nationality is equity compensation. Staff whose goals are aligned with those of their employer will want to see the company do well, consequently it provides motivation by giving them a compelling, financial reason to remain. It can also assist with attracting new talent, since an equity compensation plan is a very desirable component that could give you the edge over competitors.

Equity compensation could therefore, be a central piece in your employee’s financial wellness jigsaw puzzle – but it’s important to note that with this comes an educational element too.

What is Financial Wellness?

When we say financial wellness and control of finances we are speaking about all the factors and concerns a person may have about their finances. The journey towards developing financial awareness is similar to Maslow’s hierarchy of needs as it follows that people’s needs will change as they progress, pursue and achieve each financial goal.

Expanding their financial literacy can help your employees develop an enduring roadmap for meeting their current and future financial goals, such as:

  • Budgeting and keeping spending within one’s means
  • Being financially prepared for emergencies
  • Being aware of and having access to the information needed to make good financial decisions
  • Planning for the future

These take into account things like savings, debt management, tax, mortgages, family commitments, budgets, pensions and legacy planning.    

Financial education and employee stock plans

When introducing and operating a stock-based compensation scheme (a type of non-cash pay that a company offers to employees to partake in ownership of the firm), whether that is an ESPP (Employee Stock Purchase Plan), RSU (Restricted Stock Units) or some other offering it’s imperative that your employees understand the technicalities involved.

Depending on the option you go with there can be a variety of financial rewards for participants, such as discounted access to company shares or being a cost-efficient way to pursue a disciplined savings plan. Plus there might have tax benefits too.

That’s why education is so important. Having a great offering is no use if your staff can’t figure it out. If they don’t get the plan then they’re not going to see the benefits, meaning they’re less likely to buy in or participate, which ultimately becomes a vicious circle – this is why aiding and advancing your employees’ financial literacy is crucial.

Taking the time at the very beginning to engage your employees and explain how their equity awards fit into their own broader financial lives and, consequently, how this affects their overall financial wellness, is an integral cog.

Some factors you will need to consider explaining are:

  • Which employees will be eligible to participate
  • Are there any restrictions to entry of the plan and how do you get enrolled in it
  • Is there a vesting period and if so how does it operate
  • How can you buy shares and when do they qualify
  • Are there any tax implications
  • Key dates e.g. plan invitation date, closing date for applications, first payroll deduction month, contract start date, maturity date, etc
  • What happens to their equity if they leave the company

Clarity in communication

Taking a holistic approach to implementing and operating your stock plan is recommended, to ensure it has the best chance of integration. At Global Shares we believe that education and financial literacy go hand-in-hand with equity compensation, which is why we’ve built this into our software.

Using our secure, customizable online employee portal your team can see the potential of their equity with interactive visuals and financial calculators. Participants can log onto their Global Shares equity portal anytime, anywhere, and easily sell stock, accept grants and exercise options, no matter where in the world they’re based.

For employers we supply a financial reporting wizard which allows you to generate stock compensation accounting reports instantly via our extensive financial reporting suite. You can easily automate your expenses, disclosures, deferred tax and EPS reporting, analyze data on stock plan participants or collect information on particular awards/grant types in real time. Basically everything you need in the one place.

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At Global Shares employee ownership is at the heart of everything we do and we apply it across every aspect of our business. We know that access to information is crucial because if your staff have no visibility of their awards, how they work or how they affect their financial wellness then your compensation plan isn’t really doing what you need it to.

So get in touch to find out how we could help you to start harnessing the power of employee ownership and assist your employees with their financial education too.

Employee ownership, simplified. It’s what we do.

Please Note: This publication contains general information only and Global Shares is not, through this article, issuing any advice, be it legal, financial, tax-related, business-related, professional or other. The Global Shares Academy is not a substitute for professional advice and should not be used as such. Global Shares does not assume any liability for reliance on the information provided herein.

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