Inflation’s impact on employee share plan buy-in (and how to tackle it)

How do you encourage share plan buy-in, when the cost of living is forcing many employees to tighten their purse strings? The answer: Education and communication.

As wages fail to keep up with inflation and the cost of living continues to rise, many employees are really starting to feel the squeeze. And as the bills go up, one of the things they naturally turn their attention to is how to take back some control.

The first thought that often springs to mind is ‘should I look for a job with a higher salary’? So for employers, it’s more important than ever to find ways to hang onto talent. Naturally, your employee share plan has a crucial role to play.

With less spare cash in employees’ pockets, drumming up interest might feel like an uphill battle. But financial resilience doesn’t just equate to the amount of money you have in the bank, it’s also about having a long-term plan for coping with whatever life throws your way. This is the key message to relay to employees.

Financial education is crucial

One of the biggest hurdles to overcome is often around gaps in knowledge. Employees may naturally see a share plan as another up-front cost, without considering the bigger picture. They may not realise, for example, that Share Incentive Plans (SIPs) can essentially give them something for nothing – free shares from their employer, whilst Sharesave often offers a generous discount to buy company shares. They may also not realise that most all-employee share plans benefit from tax advantages that allow participants to keep more of any gains for themselves. Often, there’s also nervousness around share prices falling over time, and investment money being “lost”.

One of the key considerations for employers, during these uncertain times, is to identify the gaps in knowledge specific to their workforce and then work towards addressing them. And this is where having a financial education or financial wellbeing strategy can help bolster engagement. If you give employees the tools and resources to increase their knowledge around investing and scope their goals and future needs, you’re arming them with the confidence to make informed decisions.

This might, for example, involve some myth busting – many might not know that share price growth and dividend yields tend to deliver an investment return in excess of both inflation and the money invested. Or it might involve delivering seminars or webinars dedicated to improving knowledge around share plans, covering topics such as managing a maturing plan.

Think of financial education as the precursor to inviting employees to buy-in – the warmer they are to the idea, the more likely they are to get involved.

Create attractive reasons to invest

Now may also be a good time to review what’s on offer to employees and how this might increase engagement. For example a Company Share Option Plan (CSOP) or Enterprise Management Incentive (EMI), where there’s no upfront investment required, could sound particularly attractive to colleagues in the current climate. Or, you could award Free Shares under the likes of a SIP, as a way to aid retention (whilst also delaying the cost and providing some tax breaks for your business).

Speak to your employees’ needs

And of course your communications strategy is key to creating share plan buy-in. As with any effective strategy, you want to deliver a message that speaks to the concerns of your colleagues and delivers a solution.

The concern? A lot of employees are worried their financial situation is spinning out of their control, because costs are going up. The solution? By investing just small amounts now, they can take back some of that control later in a more meaningful way. People want to feel in control in a world that feels increasingly volatile. Getting into a savings or investing habit is proven to help people feel more empowered, which in turn reduces worry. If you get your messaging right, you can connect with these motivators and create a powerful reason to invest.

 

So while the current state of the economy might make it seem like a tricky time to ask employees to invest in a share plan, the opposite could actually be true with a switch in thinking. Using this period to show you’re in tune with the financial pressures facing employees, and thinking strategically about how you can help them address those through their share plan choices, could be a win-win all round.


If you’re wondering how to communicate your share plan this year against the backdrop of escalating inflation, we can help you. Here at Eximia, we combine share plan expertise with creative skills, so come speak with us today to find out more.

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