Retaining Employees with Shares: The Ultimate Guide

We live in a time when talent is a scarce commodity. Retaining good employees is just as important (if not more important) than attracting new ones. So how do you ensure that you keep top talent on board? A proven method is employee participation, or providing shares. In this article, we will tell you everything you need to know about retaining employees through shares.

Why Retain Employees with Shares?

The idea is simple: if you give employees shares in the company, they have a direct financial interest in the company's success. They become, in a sense, co-owners and will therefore be more motivated to engage.

1. Motivation and Engagement: Employees who feel like owners tend to work harder and are more engaged with the company.
2. Retention of Talent: By offering shares as part of the compensation package, it becomes more attractive for employees to stay.
3. Shared Success: If the company makes a profit, so do the employees who own shares.

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SAR plan

A SAR is a kind of virtual share. The employee receives a bonus linked to the company's value growth.

Profit sharing

With profit sharing, employees receive a bonus based on the company's profit.

Stock options

Stock options give employees the right to buy shares at a predetermined price.

Stock certificates

With stock certificates, employees receive profit rights but no voting rights.

Bonus

The employee receives a bonus based on targets.

Shares

The employee becomes a co-owner of the company.

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How Do You Get Started?

If you decide to implement employee participation, follow these steps:

1. Define the Goal: Do you want to reward, retain, or motivate employees, or all three? Your goal determines the structure of your participation plan.
2. Choose a Model: There are various ways to structure employee participation. Options, shares, profit-sharing; what fits best with your company?
3. Communication: Ensure clear communication to your employees about what the plan entails, how it works, and what the benefits are.

Pitfalls and Tips

While employee participation has many advantages, there are also pitfalls to be aware of:

1. Not all employees are interested: Some may prefer a higher salary or other benefits.
2. Share value can decrease: Like any investment, shares can lose value.
3. Complexity: Setting up and managing an employee participation plan can be complex. Make sure you are well-informed or hire an expert.

Tips:

• Consider establishing a 'vesting period' during which employees cannot sell their shares. This encourages long-term thinking and helps keep talent on board.
• Communicate clearly and transparently. Employees need to understand the plan in order to appreciate it.

Conclusion

Retaining employees through shares can be a powerful tool to stimulate motivation and loyalty. It demonstrates that you believe in the value your team brings and offers them a chance to share in the company's success. If done well, it can be a win-win for both employers and employees.