Benefits of an ESOP

When trying to address issues of retention and productivity, a lot of tried and true options usually get tossed on the table. Some companies, however, are taking a bolder, out-of-the-box approach that has been shown to work, now more than ever. An employee stock ownership plan (ESOP) is an employee-owner method that provides a company’s workforce with an ownership interest in the company. In an ESOP, companies provide their workers with stock ownership, often at no upfront cost to the employees.

According to the ESOP Association, roughly 10,000 ESOPs are in place in the U.S. covering 10.3 million employees. They even make up about 10 percent of the private sector workforce. Does that mean an ESOP strategy can make the company more valuable and the employees more productive?

Benefits of an ESOP 1

Hiring Strategy
An ESOP is very attractive to the hardest working innovators in any industry. That’s exactly the type of talent you want working for your organization. These employees are driven to make business grow. They want a career at a place where they can really make a difference. If you want to attract the top performers in your field, giving them an ownership in the company is just the added benefit you need to give you the recruitment edge.

Dedicated Employees
When they have ownership in the company, workers prioritize the job. When their organization is working more efficiently, it is likely making more money. More profits, more success means the company’s shares are worth more. Working harder makes an ESOP more valuable, so employees are more likely to reap long-term rewards.

Perks for the Original Owners
Some owners find selling to an ESOP a much better alternative than full-fledged retirement. The sales price for a given company is often the same with an ESOP. Plus there are numerous tax advantages with an ESOP. In addition to all this, most owners are inspired to sell to an ESOP to preserve their legacy and pass it on to those who helped them build it.

The Numbers Don’t Lie
The Employee Ownership Foundation survived ESOP companies and found that:

• 3% reported that creating an ESOP plan was a good business decision that benefited the company.
• 76% indicated the ESOP boosted overall productivity.
• More than 70.5% reported profitability and revenue increase.

Financial benefits aren’t the only perk of an ESOP. A recent study found that ESOP employees:

• Have improved well-being.
• Have greater participation in decision-making.
• Experience higher pay, benefits and wealth.
• See greater job security and satisfaction.
• Trust more deeply in the firm and management.

While ESOPs are not the ideal option for every business, the numerous benefits are available to all company stakeholders. If you’ve been thinking about an ESOP as a succession-planning technique, give Sue Burnett at Burnett Specialists or Choice Specialists a call. As the largest staffing and placement firm ESOP in Texas, we have the experience you need to address your specific workforce challenges. Give us a call today