At PCL Construction Ltd., almost 90 per cent of eligible staff participate in the company’s employee share purchase plan. Offering employees the opportunity to buy shares in their employer is generally seen as a way to boost employee attraction, retention and engagement.
Indeed, Mike Olsson, the construction company’s vice-president of human resources and professional development, says the long-running program has helped pull in and keep quality talent, as well as encouraging an ownership mindset.
“Our employees have a voice,” he says. “Automatically, our engagement is higher because people truly believe they are acting and engaging like owners — so that’s a massive advantage. As an employer, it has really reinforced our values, our code of conduct, our ethics . . . because people are looking across the table at fellow owners. We’re all in it together.”
A reason to stay
Employee share purchase plans can also help employees invest for the long haul, both figuratively and literally, says Scott Anderson, regional vice-president of employee benefits at Hub International Ltd.
The plans allow staff to buy company shares after a certain length of service with their employer. In PCL’s case, employees have to be with the company for a year before they can buy in.
Many companies also offer an extra financial incentive to purchase shares, such as contribution matching or discounts. And, in something of a tradeoff, share plans typically require employees to hold the purchased shares for a minimum amount of time, or vesting period.
“It’s harder to leave if you’re a shareholder or, to put it a more positive way, it gives people a reason to stay,” says Anderson. “So an employee share plan may make employees think twice because they may be forfeiting some shares by leaving or giving up some growth in the future.”
Alongside these advantages, employee share purchase plans do take some effort to implement. For example, while PCL has been 100 per cent employee-owned since 1977, the company has to invest time in educating prospective employees about the ins and outs of the program.
“The majority of the people who want to join PCL have some notion that we’re employee-owned,” says Olsson. “It actually takes a while to dig into the detail of what it means.”
And there are often ongoing costs associated with running these plan, notes Anderson. “Unlike just setting up a group [registered retirement savings plan], you’re going to have to have a trustee and a brokerage involved and somebody issuing the shares and somebody keeping them in trust, so that can get expensive when you set it up. Also, valuing the shares can get expensive because you’re going to have to get actual, professional valuations.”
Of course, large publicly-traded companies already have quarterly valuations, so offering stock options is less of a burden. But on the flipside, small startups that offer share purchase plans in lieu of salary may face challenges in keeping their immediate costs down, adds Anderson.
However, for every story of an early Google employee getting rich from cashing in their stocks once the technology company took off, there’s a story of employees who lost money when their company stock took a nosedive, he says, warning that a perk meant to improve employee morale could end up doing the exact opposite.
Despite the risks, PCL’s plan continues to be a key part of its DNA. And sharing has been good for business — the company has grown from 25 employees/owners to more than 4,600 staff, of which about 4,100 have an ownership stake.
“The vision of our company is to remain employee-owned,” says Olsson. “Our current [chief executive officer], our current board, we all want to provide this incredible opportunity of employee ownership for multiple generations to come, and that’s part of the legacy we want to have.”
Melissa Dunne is the managing editor of Benefits Canada.