Financial Wellness and Equity Compensation

Post contributed by

July 25, 2024

J.P. Morgan Workplace Solutions

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Taking your employees’ overall financial wellness into consideration when developing a communication and education strategy for your employee equity plans can really make the difference and impact their engagement with your offering.

Equity compensation can be a difficult concept to understand, with its own terminology and rules around elements like vesting and tax. A common challenge faced by companies when launching a plan is a lack of financial knowledge among employees about what is being proposed.

Ideally, it would be beneficial for companies if there was a greater understanding of personal finance-related issues among individuals by the time they enter the workforce; however, this is something that companies can try to address by offering their own robust financial education supports to employees. Effective communications about the plan details leading up to and during a registration period can also work to bridge this gap.

Making informed decisions

Financial wellness is about more than just what you earn, it’s about how you manage and think about your finances.

Your employees may or may not have thought consciously about their financial life, such as:

• How do you manage your money?
• How aware/intentional are you around your spending and saving?
• What does it mean to set financial goals?
• Do you understand your workplace offerings and how to partake in them?

Remember, financial wellness at its core is about making informed choices.

Equity compensation plans can be a great way to motivate, reward and retain top quality staff. With their potential for returns higher than cash-only based awards, they can provide great opportunities to people, but their complexity can be off-putting, especially to those who have had little exposure to them in the past or who don’t fully understand them.

Since most employee equity plans require an element of engagement or understanding from participants, especially around how to participate, taxation and key dates like launch and vest, how you choose to deliver this information can play a major role in the success or otherwise of the plan.

If your people don’t understand, then they may choose to not sign up, which is why focusing time and energy into your employees’ education is crucial. Teaming with an equity compensation management provider who can help you to develop a robust educational and communications plan can help to pay dividends.

Keep in mind it’s not only young people who may enter the workforce with limited financial knowledge either, so consider the educational needs of all your employee demographics and don’t leave any cohorts out.

Financial education, built in from the outset

Education, which is often overlooked or left until the last minute, needs to be part of the conversation from the outset. There is little point in having a great offering if your staff can’t figure it out or understand how the plan is going to benefit them. They’ll become less likely to participate, which in turn can become a vicious circle.

When it comes to introducing an equity compensation plan, there are so many opportunities for messages to be miscommunicated or left open to misinterpretation and confusion. Think about how you explain tax, vesting or even how contributions are made. The repercussions of people not understanding these basic elements could negatively impact your share plan. If you put the time in and get it right from the start, then the results speak for themselves.

Access to information is crucial and that begins with your staff first of all understanding why they are getting these awards. If they don’t understand how their benefits work or have no access to information to learn about it, then your plan isn’t going to be doing what you need it to.

When setting out to develop and implement an equity compensation plan, HR and compensation & benefits teams should consider and ask fundamental questions of the plan and think about ways to make it a little more approachable and accessible for the majority of people who don’t have a financial background.

An effective communications strategy should aim to make the advantages clear quickly and memorably, while being sure to place the employee at the heart of everything.

For your employees, financial wellbeing can bring with it some sense of security and freedom of choice currently and in the future

Find out more

Global Shares is now J.P. Morgan Workplace Solutions. We believe that involving people in the success of the company via participation in equity-based incentive plans is the best way to motivate them to achieve success and create a stronger company both now and into the future.

We provide businesses of all sizes with an all-in-one equity compensation management offering. More than just your equity compensation provider, we handle all the equity award administration so you have nothing to worry about, offer participants easy access to their equity holdings, executives services, financial education and insights.

You can learn more here.

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Please Note: This publication contains general information only and J.P. Morgan Workplace Solutions is not, through this article, issuing any advice, be it legal, financial, tax-related, business-related, professional or other. J.P. Morgan Workplace Solutions’ Insights is not a substitute for professional advice and should not be used as such. J.P. Morgan Workplace Solutions does not assume any liability for reliance on the information provided herein.

J.P. Morgan Workplace Solutions is a brand name for equity compensation administration business conducted by Global Shares and other financial products and services offered through J.P. Morgan Securities LLC and other affiliates of J.P. Morgan Chase & Co.

Global Shares is a trading name of the legal entities described hereafter including Global Shares Ireland Limited (“Global Shares Ireland”), a company registered in Ireland, registration number 412396 with its registered office at Unit 2, Building D, West Cork Technology Park, Clonakilty, Co, Cork, Ireland which provides share plan administration services and software. Global Shares Inc. (“Global Shares US”) is incorporated in Delaware and provides share plan administration services and software to certain U.S. Companies.

For securities traded in United States markets, Broker Dealer Services are provided by Global Shares Financial Services, Inc. (“GSFS”), Member FINRA/SIPC, 575 Washington Blvd, Floor 09, Jersey City, NJ, 07310-1616, (646) 968-0653. Check the background of Our Firm on FINRA’s BrokerCheck.

Global Shares Trustees Ireland Limited, Global Shares Trustees (UK) Limited, and Global Shares Trustees Company Limited (collectively, the “Trust Companies”), are Irish and UK trust companies that provide limited trust services for corporate share plans.

Global Shares Execution Services Limited (“GSESL”) is licensed to conduct investment services business under the Investment Services Act as authorised by the Malta Financial Services Authority (“the MFSA”) pursuant to licence number GSES-IF-14206. GSESL offers receipt and transmission of orders and nominee services under its provision of business. The registered address is at 171, Old Bakery Street, Valletta, VLT1455, Malta. Global Shares Ireland, Global Shares US, GSFS, the Trust Companies, and GSESL are affiliated companies and all under the common control of JPMorgan Chase & Co.

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