An increasing number of job seekers are considering more than just salary when choosing a new company. From health and wellness benefits to paid time off (PTO), pension plans and RRSPs, they review the total rewards package carefully before committing to an employer.
Organizations wanting to recruit and retain the best people recognize the importance of creating an attractive compensation package that will give them an advantage when competing for talent. One benefit more companies are adopting to increase the overall value of their total rewards program is the Employee Share Purchase Plan (ESPP).
When employees purchase shares, they essentially become owners of the company and feel they have a vested interest in its success. As part owners, they gain a sense of responsibility and are motivated to work harder. Companies offering ESPPs often report increased engagement, improved productivity and greater loyalty.
Here are a few ESPP benefits.
1. Easy payroll deductions
Share purchases can be automatically deducted from the employee's paycheque – when they don't see the money they don't miss it, making it easier to save. At a time when the Canadian Payroll Association 2018 Survey of Employed Canadians found that 44% of working Canadians said it would be hard to meet financial obligations if their paycheque was delayed by as little as one week,1 any form of saving can contribute to their improved financial wellness.
2. Employer contribution matching or discounts
Employees who participate in their company's ESPP can take advantage of employer contribution matching or discounts on shares up to a specified maximum amount. A regular contribution benefits from dollar cost averaging – when the share price is down, they can purchase more shares to increase their position.
3. Maximize investment, minimize taxation
Your company's ESPP can include choices for TFSAs and RRSPs, both of which can help maximize investment and minimize taxation.
With a TFSA, any income earned by shares held in the employee's TFSA will be tax-free and dividends paid on shares are non-taxable. When an employee sells the shares, any capital gains are also tax-free.
With an RRSP account, payroll contributions come from the employee's pre-tax income. Any income earned within the RRSP is tax-deferred.
When an employee leaves
While participation in an ESPP can decrease turnover, some staff will still move on to pursue other opportunities or retire. When an employee leaves the company, what happens to their ESPP account?
At Computershare, we can accommodate a “leaver” plan at no additional cost to your company. To learn more, see “Non-Registered Leaver Account Maintenance for ESPP”.
Offering an ESPP as part of your company's total compensation package is a good way to contribute to the financial wellness of your employees, enhance loyalty and improve performance. Plan membership can lead to a happier, more productive workforce, and have a positive impact on your bottom line.
To learn more about the features available with your ESPP, contact your Relationship Manager.
