How to Build Success Through Strategic ESPP Design

January 30, 2024

In today’s talent war, where skilled employees hold more power, traditional benefits simply aren’t enough. Candidates crave a deeper connection to their companies, a sense of ownership in their work beyond just a paycheck. This is where the humble Employee Stock Purchase Plan (ESPP) emerges as a game-changer.

Beyond its alluring appeal to talent, ESPPs offer strategic advantages in the current volatile market. With inflation squeezing payrolls and traditional stock options losing their luster, ESPPs provide a tangible opportunity for employees to share in company success and hedge against financial uncertainties. But here’s the catch: not all ESPPs are created equal. Optimizing yours requires navigating a labyrinth of choices with far-reaching consequences for both your employees and your bottom line.

Prepare to ditch the one-size-fits-all mentality and design an ESPP that’s not just a perk, but a strategic weapon driving engagement and retention.

4 Strategies to Create a Better Employee Stock Purchase Plan

Whether you’re designing a new ESPP or redesigning an underperforming existing plan, consider the following when creating and offering the best ESPP for your company and employees:

1. Establish the objectives you wish to meet by offering an ESPP. ESPPs can be used for various reasons, including capital procurement, increased employee engagement, and talent acquisition. Knowing what you want to achieve with your plan will enable you to craft the best plan design.
2. Seamlessly align with company goals. Consider your company’s identity and strategic goals, and make sure your ESPP reflects your culture. Strong employee participation is more likely when the plan’s design aligns with your corporate vision.
3. Design your ESPP around its features. There are many plan aspects to consider while creating your ESPP, including which employees will be eligible and when, how long your offering period will last, what your purchase periods and contribution methods will be (like payroll deduction, cash, fixed dollar amount, percentage of pay, etc.), and whether to offer a discount or match. Lookbacks, holding requirements, full or fractional share offering, cash dividends, and reinvestments are all plan features that will help you engage your employees. Make sure you understand each of these features and choose the ones that best fit your objectives.
4. Foster financial wellbeing throughout your organization. Think about areas where your business can achieve tangible gains while meeting employee priorities. While it’s vital to build your plan with your employees in mind, it’s equally important to develop it with your organization’s benefits in mind as well. You must be able to provide advantages on both sides. When designing your ESPP, take your cash flow, tax deductions, share depletion, and expenses into consideration. A well-executed strategy tracks and meets organizational goals, streamlines administrative tasks, and improves employee engagement, communication, and satisfaction.

There’s a lot to consider when designing (or redesigning) your ESPP. A well-designed plan will boost employee engagement and invite plan participation, ultimately supporting your corporate strategy. Unlock the potential of your ESPP with a strategic design that combines your company values and long-term goals to benefit both your employees and company future.

How Certent Equity Management Can Optimize Your ESPP Design

With so many variables to consider while designing your ESPP, you may not know where to start. A good equity management tool, like Certent Equity Management from insightsoftware, can help you create an optimized ESPP with confidence and efficiency. It goes beyond the basic functionalities, offering advanced features and capabilities that significantly contribute to the effectiveness of your plan.

From the initial design phase, where you define eligibility criteria and contribution limits, to the ongoing administration involving communication, compliance management, and reporting, Certent Equity Management provides a centralized platform for seamless coordination.

Automated Administration

Certent Equity Management automates the administration of the ESPP, streamlining tasks such as enrollment, contribution tracking, and communication. Ensure accurate record keeping and support all aspects of your plan, from managing eligibility to processing purchases.

Customizable Plan Design

Design a flexible ESPP plan that meets your needs when setting up offering periods, purchase periods, and fair market value price definitions. Stay on top of enrollments, contributions, purchases, and disqualifying dispositions with a robust set of administrative and accounting reports.

Real-Time Reporting and Analytics

Gain instant visibility into equity compensation across your enterprise with real-time reporting and analytics on plan participation, contribution trends, and overall plan performance. This data allows businesses to assess the effectiveness of the ESPP, identify areas for improvement, and make informed decisions to optimize the plan.

Secure Online Access for Participants

Certent Equity Management offers a secure online portal where your employees can access information about their ESPP participation. This includes details about their contributions, stock purchase history, and relevant documentation. Providing easy and secure access enhances transparency and employee engagement.

Compliance Management

ESPPs are subject to regulatory compliance requirements. Certent Equity Management helps your business stay compliant with reporting tools designed to meet SEC, FASB, and IFRS regulatory requirements. This enables you to streamline ASC 718 compliance and reporting, and to automatically generate 6,039 different tax reporting statements and filings.

Integration with Payroll and HR Systems

Seamless integration with payroll and HR systems ensures accurate and efficient processing of ESPP-related transactions. This integration reduces the risk of errors and ensures that participant contributions are seamlessly deducted from payroll.

Participant Support and Assistance

With Certent Equity Management you can offload your day-to-day equity administration to our expert team of certified equity professionals. Our equity professionals are always on hand to answer your questions as they partner with you to deliver your equity plan.

Simply put, Certent Equity Management is not just a software solution; it is a strategic partner in the successful design and administration of your ESPP. By providing automation, customization, real-time insights, compliance management, and participant support, Certent Equity Management provides you with the necessary foundation to create a program that is not only compliant and efficient but also resonates with your employees, fostering engagement and loyalty.

Ready to learn more about how Certent Equity Management enables you to streamline your ESPP management, tighten compliance, minimize risk, and improve your productivity? Check out our blog or schedule a demo today.