These reports indicate one thing: retention challenges are real, and the impact is massive across industries, regardless of company size, sector and revenue. As workforces are transitioning from one generation to the other, the needs and aspirations of employees are shifting. What worked for baby boomers may no longer be relevant for the newer generations like Gen Z and so on. Perhaps with the rise in technological innovations, there are more opportunities in the global job market than in previous decades. As a result, the workforce now has the ability, and privilege, to pick and choose across roles and organizations that best suit their needs and aspirations, rather than the inverse. While one can argue the merits of this from an individual perspective, this trend has decreased employee loyalty and led to retention becoming a major challenge for all businesses.
A report by SHRM estimated that every time a business replaces an employee, it costs 6 to 9 months’ salary on average, which means, for a manager making $60,000 a year, it would come to $30,000 to $45,000 in recruiting and training expenses. This doesn’t include the losses incurred in terms of interview time, knowledge, productivity, and cultural impact.
Apart from the financial loss, low retention rates impact motivation, productivity, and performance of employees. It is observed that rarely resignation is based on a one-time emotional experience of an employee, but is instead, a slow process that culminates into a major decision over time. For instance, before employees quit, they may become less of a team player, do the minimum amount of work required of their role, and often resist committing to long-term deadlines.
Gallup’s 2020 meta-analysis report found that teams with low engagement face higher employee turnover rates (between 18%–43%) than teams with high engagement levels, and also discovered that 52% of employees who left an organization voluntarily said that their manager or company could have done something to prevent them from leaving their job.
Turnover rates can be a direct reflection of the overall employee’s experience that comes from work culture and environment within an organization. Hence, business leaders and HR managers need to introspect occasionally, and ask: am I doing enough to keep the current workforce engaged in their role and organization? [Given the importance and impact of retention, what is your business currently doing to retain talent? What steps or measures have you taken to ensure long term loyalty of employees?]
ESPPs are a great, and easy, way to increase retention as they enable employees to invest financially in the company and thereby stay engaged in the company’s long-term mission and growth. According to Fidelity, 63% of employees said participating in their company stock plan gives them a sense of ownership of the company, and 53% said it makes them feel more loyal to their employer.
While ESPPs are unarguably fantastic for employee engagement, the downside is that they require free cash flow in order to participate, given the need for eligible employees to divert funds from payroll in order to buy into the plan. While this had historically priced out certain cohorts of the eligible employee population, such as those that are just starting out, those that are lower earners, and those that are trying to maximize other benefits, that’s no longer the case thanks to Carver Edison, a New York based fintech company that has introduced the Cashless ESPP® powered by their award-winning ESPP enhancement, Cashless Participation®.
Cashless Participation gives eligible employees the ability to participate in ESPPs without shrinking their paychecks. This means that all eligible employees have an even playing field and can participate in their ESPP if they want to rather than if they can afford to. As such, the Cashless ESPP® promotes financial inclusivity across the board, enabling employees across any salary band to avail this financial benefit freely, without having to cut into their paycheck. Likewise, employees who would otherwise feel disengaged and disenfranchised are more directly aligned with the organization thanks to the ability to participate.
As of March 2022, 64% of US workers stated that they live paycheck to paycheck. Using Cashless Participation, employees can earn 50% to 150% more shares compared to the traditional ESPP benefits. More shares in the company’s stock ultimately means a deeper sense of interest and commitment with higher employee engagement in the company's success, which can be a strong driver for employees to contribute their best in the overall organizational goals, as it connects the bigger picture with their individual financial wellness.
For businesses who are currently identifying and defining the problem: If you're looking to hire and retain the best talents in the market, please reach out to us to find out how ESPPs can help enhance talent attraction and employee experience.
For businesses who’ve already defined the problem and are currently building a solution: If you’re looking for higher employee engagement and productivity, we can help you implement customized ESPPs that can boost employee engagement and performance.
For businesses who already have a solution in place but need support in execution and optimization: If you’re looking for the best and most suitable ESPP for your employees, we can help you design a customized Plan that meets the specific needs of your employees while driving the highest ROI for your business.
Please visit the cashless participation page or book a meeting with us for more information. If you have any specific questions, you may also write to us directly at: marketing@carveredison.com
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