Promoting financial wellness is about more than just offering employees a good salary and access to an equity compensation plan or pension – it’s about helping them to understand these benefits. This is why taking your employees’ overall financial wellness into consideration when developing a communication and education strategy for your employee equity plans can help make the difference and impact their engagement with your offering.
Equity compensation can be a difficult concept to understand, with its own terminology and rules around elements like vesting and tax. A common challenge faced by companies when launching a plan is a lack of financial knowledge among employees about what is being proposed.
Ideally, it would be beneficial for companies if there was a greater understanding of personal finance-related issues among individuals by the time they enter the workforce. While this is not always the case there is something that companies can do to try to address it, by offering their own robust financial education supports to employees. Effective communications about the plan details leading up to and during a registration period can work to bridge this gap.
Making informed decisions
Financial wellness is about more than just what people earn, it’s about how they manage and think about their finances and financial life, such as:
- How do you manage your money?
- How aware and intentional are you around your spending and saving?
- What does it mean to set financial goals?
- Do you understand your workplace equity compensation offerings and how to partake in them?
Remember, financial wellness at its core is about making informed choices.
Equity compensation plans can be a great way to motivate, reward and retain top quality staff. With the potential for returns higher than cash-only based awards they can provide great opportunities, but their complexity can be off-putting, especially where people have had little exposure to them in the past or don’t fully understand how equity compensation works.
Since most employee equity plans require an element of engagement or understanding from employees, especially around how to participate, taxation and key dates like launch and vest, how you go about delivering this information can play a major role in the success or otherwise of the plan.
Simply put, if your people don’t understand then they may choose to not sign up, which is why
focusing time and energy on your employees’ education can prove crucial. Teaming with an equity
management solution provider like J.P. Morgan Workplace Solutions who can help you to develop a robust educational and communications plan could make all the difference.
Keep in mind it’s not only young people who may enter the workforce with limited financial knowledge either, so consider the educational needs of all your employee demographics and don’t leave any cohorts out.
Financial education, built in from the outset
When it comes to introducing an equity compensation plan there are so many opportunities for messages to be miscommunicated or left open to misinterpretation and confusion. Education, which
is often overlooked or left until the last minute, needs to be part of the equity compensation conversation from the outset. There is little point in having a great offering if your staff can’t figure it out or don’t understand how the plan is going to be benefit them.
You should ask fundamental questions of the plan and think about ways to make it as approachable and accessible for the majority of people who don’t have a financial background. Consider how you plan to explain how tax, vesting or even how contributions are made. Remember, the repercussions of people not understanding these basic elements could negatively impact on your share plan. It’s better to put the time in and get it right from the start.
Access to information is crucial and that begins with your staff first of all understanding why they are getting these awards. An effective communications strategy should aim to make the advantages clear quickly and memorably, while being sure to place the employee at the heart of the offering.
Find out more
At J.P. Morgan Workplace Solutions we work with companies from around the world every day to help bring their reward strategies to life. We believe that involving people in the success of the company via participation in equity-based incentive plans is the best way to motivate them to achieve success and create a stronger company, both now and into the future.
Our tech and service-based offering was created to empower employees to easily navigate their workplace incentives with confidence. Get in touch to find out how our team of dedicated equity professionals could help you.
Employee ownership, simplified – it’s what we do.
Please Note: This publication contains general information only and J.P. Morgan Workplace Solutions is not, through this article, issuing any advice, be it legal, financial, tax-related, business-related, professional or other. J.P. Morgan Workplace Solutions’ Insights is not a substitute for professional advice and should not be used as such. J.P. Morgan Workplace Solutions does not assume any liability for reliance on the information provided herein.
