Improving economic conditions and a strengthening job market are prompting many U.S. companies to enhance their employee stock-purchase plans.
According to a survey by Fidelity Investments, 51 percent of companies said they planned to modify their employee stock-purchase plan within the next couple of years, with one-third of employers either introducing or increasing the employee discount on company stock between 10 and 15 percent.
Some have added a "look back" provision to help employees buy shares in their company at a lower purchase price.
The downturn in the stock market in 2008 caused nearly three-quarters of employers to change their employee stock plan by either lowering or eliminating the employee discount on stock, shortening the "look back" period or removing the provision altogether.
“During the recent recession, some employers felt the need to reduce or eliminate the discount in their employee stock purchase program — just as many employers felt the need to reduce or eliminate their 401(k) match,” said Kevin Barry, executive vice president for stock plan services at Fidelity Investments.
“But as the economy continues to improve, companies are reinstating their discount as they realize that an attractive employee stock purchase plan can be a significant asset in attracting and retaining the most talented employees — especially in competitive hiring markets like technology, professional services and transportation.”
A majority of the employers surveyed felt that an employee stock purchase plan should be part of a company’s benefits package and 72 percent believe the plan is as valuable as pensions and dental benefits and more valuable than company-provided life insurance.
More than 40 percent said they were strengthening their stock-purchase plan to attract talent in a competitive market. Thirty-three percent said they hoped the enhanced plan would help retain valued employees, and 45 percent felt improvements to the plan would motivate their workforce and improve morale.
A 2012 Fidelity survey found that the majority of stock plan assets are being earmarked for eventual investment or retirement savings after participants sell them, and 82 percent felt their plan was an effective tool to help their employees reach their financial goals.
The survey was conducted between Dec. 18-28, 2012. Respondents were decision-makers regarding the administration of either a restricted stock, stock option or employee stock purchase plan.