Businesses are feeling financial pressure at the moment, but so are employees. So, companies across the UK are finding new ways to support their employees through the cost of living crisis and help them prepare for the future.
First, what is the buzzword ”financial wellbeing”?
Financial wellbeing means you have financial security and freedom of choice in the present and future. It can be affected by multiple things – one of which is the social and economic environment. For example, some employees are offered private health insurance at work, while others aren’t.
Employers who enhance their employees’ remuneration packages with access to other benefits – such as healthcare insurance or equity compensation – can make a positive difference.
But, why should you care about employee financial wellbeing?
More than one-third of UK adults feel anxious about their finances. Almost 30% of the UK workforce (8.2 million people) say financial worries from the cost-of-living crisis have negatively impacted their productivity at work.
You should be aware of the long-term impacts of not helping your employees during a difficult economic situation, e.g. absenteeism, staff turnover and employee morale issues.
It’s also widely acknowledged that companies that value and treat their staff well will most often reap the benefits through loyalty, enhanced engagement and dedication.
So, how can you help to improve employee financial wellbeing?
While increasing pay is not practical for all companies, you can help your employees make smart financial decisions via communication and education campaigns. Some companies take a step further by offering share-based compensation – equity awards or share schemes.
A UK facilities management and professional services company included a matching share scheme as part of its financial support in 2022 to support low-income employees. In their Share Incentive Plan (SIP) – a UK all-employee scheme providing employers with an easy and flexible way to offer shares to their employees, the company offered their employees one free ‘Matching Share’ for every two shares that employees bought to increase the value of their investment by 50%. In addition, the plan will be more tax-efficient if employees are willing to leave their shares in the plan for longer.
While SIPs may not solve money worries immediately, as employees may want to hold onto their shares to maximise their tax benefits, the plan can help boost long-term financial stability for low-wage workers with the attractive free, matching shares offered.
Don’t forget: The value of share-based compensation to your employees can be lucrative in the future – potentially more valuable than fixed cash bonuses if your company is successful and its share price grows.
How can you get benefits from offering share-based compensation?
Share-based compensation benefits both employees and employers.
You as an employer will get corporation tax relief for launching and operating a SIP. Besides, staff retention is another great benefit. Employee share plans like SIPs encourage employees to stick around longer to enjoy more tax benefits. Another popular plan – the Save As You Earn (SAYE) plan is subject to a 3- or 5-year vesting period, so it’s more likely for your employees to stay in their job thanks to this built-in retention tool.
Share-based compensation also helps achieve better alignment with your company’s goals. Since your employees’ financial benefits tie in with the company’s performance, it’s likely that they will work harder and be more motivated.
This type of compensation will also help attract talent in the war for talent if you communicate its benefit in the hiring process. Read on to find out how to create a good communication plan.
Combining share-based compensation into communication and education campaigns
Education is central to success. With a well-designed communication and education program, your employees and prospective employees can understand better what they will receive from you including any financial benefits and tax implications, resulting in making better financial decisions.
Despite the importance, 67% of employers feel they aren’t doing enough to support financial wellbeing through communications (up from 61% in 2021). So, the problem is getting worse.
The key to communication and education is clarity. Taking the time to engage your employees and prospects and explain how their equity awards fit into their own broader financial lives without using technical terms and jargon, including:
• Tax implications (It’s not uncommon for employees to face a large, unexpected tax bills.)
• What happens to their equity if they leave the company
• How and when can they buy shares
When planning your campaigns, make sure to leverage multiple communication channels like brochures, websites, videos and emails as we receive information differently – some prefer audio and some prefer visual.
One more important thing is – to know your audience. If you talk to younger people, mention something like paying off their student loans, achieving their dreams of travelling etc. They probably wouldn’t feel relevant if you only mention benefits upon retirement.
To conclude, it’s worth noting that improving employee financial wellbeing doesn’t only mean giving them more money. More money can generate more problems. By including more education and guidance in the workplace, you can help employees improve their financial literacy, leading to better decisions.
All case studies are shown for illustrative purposes only and should not be relied upon as advice or interpreted as a recommendation.
Chris brings 30 years’ management experience and knowledge of equity compensation and stock plan management to his new role at Global Shares. He has wide-ranging expertise in terms of system, product development, operations, sales and CRM. Chris was formerly Executive Director at Equatex, and prior to that spent 20 years in positions at Morgan Stanley Smith Barney, Citigroup and AST.
He is experienced in managing high profile, high revenue relationships, as well as large client bases. Chris is a current member of the National Association of Stock Plan Professionals, a former Board Member of Global Equity Organization as well as the Certified Equity Professional Institute (CEPI) Advisory Board.