Employee Stock Ownership Plans
Employee Stock Ownership Plans (ESOPs) have increased in popularity since being introduced as a congressionally approved U.S. retirement plan in 1974. ESOPs are available in many public and privately-owned companies of all sizes. For company employees, ESOP participation offers a great recompense for their years of tenure and hard work.
WHAT IS AN ESOP?
An employee stock ownership plan gives employees the option to become owners of stock in their company. ESOPs are financial account tools that buy/hold/sell the company’s stock for the advantage of company contributors in the ESOP. These employees or family then get money in return for employee shares when they retire, are terminated, become disabled, or die.
Working at an ESOP company can provide good benefits to employees. ESOP participants get great retirement benefits at no dollar cost to them. Studies shows ESOP companies tend to be more productive and profitable than non-ESOP competitors. Studies also indicate that ESOPs were linked with positive outcomes on employees’ commitment to remain employed at their current company. ESOP programs are intended to provide direct motivation and enticements for employees, so employees will have a sense of sense of belonging to their company.
Companies provide these ESOP opportunities for their employees without added costs to employees. Employees do not pay taxes on ESOP contributions when they work for the company. Should the employee leave their job, then they have to make all payments. This usually correlates to employees having a strong reason to increase their output and, ultimately, more profit for the company. This increase in productivity typically increases the worker’s personal pay, but also benefits the worker being that she/he is now co-owners of the company. Accordingly, the outcome on employees’ morale and motivation is very positive.
Another important facet, based on studies, is that workers are interested in the successful execution of job roles of their coworkers. Conversely, where there is no ESOP plan, employees are primarily impartial to their colleagues’ job performance. If other employees are more productive, it will lead to a higher overall company productivity which will lead to the market value of the company increasing. Subsequently, employees may collect wages even if his/her individual efficiency has not improved. Research mostly show that the execution of ESOP is one means to improve productivity within a company. Productivity typically has a positive effect on improving company performance.
Based on the analysis and research results, it can be determined that Employee Stock Ownership Program (ESOP) has an encouraging and substantial impact on employees’ productivity. Therefore, the higher the of application of the ESOP, the greater the productivity recognized within the company. Subsequently, employee productivity has a positive and great impact on company competitive performance. So, increased productivity in the company will, in the long run, improve the performance of the company. The benefit of employee-ownership in their company is that it offers employees a vested interest in the success of the company. This employee ownership incentive is a motivational booster that continues every month and every year.
Ultimately, the longer an employee stays with an ESOP company, the greater their incentive because of the continuing increase in retirement benefits provided by an ESOP. This blend of employee empowerment and shared ownership is a powerful way to minimizing employee voluntary turnover, increasing employee productivity and company profits.