Nine Reasons to Offer an Employee Stock Purchase Plan

1. Better employee performance

We conducted a study in conjunction with the London School of Economics¹ to determine if there was a difference in employee performance among those who participate in an ESPP versus those who do not. We found that those who participate in an ESPP:

• work longer hours
• are absent less frequently
• are less likely to quit
• express greater job satisfaction

In other words, offering an ESPP can lead to a more engaged, more valuable workforce.

2. Attract and recruit top talent

Benefits like a 401(k) and medical insurance are baseline benefits that hardly make you stand out against the competition among job candidates. But for the moment, approximately only 40% of all public companies offer an ESPP². Offering one could make your company more attractive, to help you land top recruits and deliver on your people priorities.

3. Create an ownership culture in your company

An ESPP is the easiest and often the most cost-effective way for employees to purchase shares in the company. When employees are also owners, they have a greater stake in the success of the company, which can be a powerful motivator and reduce turnover.

4. ESPPs are a broad-based, cross-border benefit

An ESPP is one of the few benefits that can be made available to all employees, including employees in countries outside the U.S.

5. Raise capital

The regular payroll deductions from participating employees provides a steady cash flow to the company. This benefit is a good one to share with your CFO when making the case for an ESPP.

6. Lower expense than other equity compensation

On a per share basis, ESPPs generally have a lower valuation than other forms of equity compensation. Setting limits on share purchases can also lower the compensation expense. This is another benefit that can assist you with reports on the ROI of your plans and justify costs to your CFO.

7. Corporate tax deductions

If your company offers a discount on ESPP purchases, it may be eligible to take a corporate tax deduction on the income recognized. The income recognized on disqualified dispositions of Section 423 plans, and discounts at purchase of non-Section 423 plans, should be reported on employees' Form W-2 to qualify.

8. Increase employee savings

Saving rates in the U.S. continue to be a problem. But with regular, automatic payroll deductions and share purchases, an ESPP can help employees to save more. And they can easily access that capital when the need arises.

9. Substitute for another (more expensive) employee benefit

In some cases, offering an ESPP can be a more cost-effective benefit than other more common benefits that can be cost prohibitive. For instance, some retail companies offer employees an ESPP rather than an employee merchandise discount.