How To Promote Equity As A Perk To Attract And Retain Talent

7 employee communication strategies companies should consider

Equity compensation has long been used by tech companies and startups to attract new talent, but in the wake of the dot-com boom and bust, today, simply offering it to new hires may not be enough. Because equity can be a complex topic, companies must make sure employees understand its value, risks and implications in order to make it an attractive perk. Whether you’re already offering stock or gearing up for an IPO, here’s how to make equity work as a perk when it comes to attracting and retaining talent.

It’s been a hot year for IPOs, and with more employees than ever looking to change jobs in the “great resignation,” equity has become an increasingly popular perk for startups and fast-growing companies looking to attract the best talent at the lowest up-front cost in a tough market.
Certainly, for early employees of Facebook, Google, Salesforce and many others, it’s fair to say that their equity compensation packages have worked out quite nicely, turning modest salaries into multimillion-dollar paydays. But offering equity as part of a compensation package isn’t a guaranteed winning strategy when it comes to attracting talent, even for the most promising young companies.

While employees may be more willing to lean into equity in exchange for a lower salary right now, in order to “sell it” as a perk, employers have an obligation to make sure employees understand what they’re getting and how to make the most of their investment both as a new hire and a tenured employee.

In fact, providing education and resources around equity compensation can substantially increase the perceived value of equity awards among employees. According to UBS, employees whose companies provide education, personalized advice, a clear plan and strong company culture that fosters growth have a much higher appreciation for equity than those who don’t. They also feel more confident about their award decisions, retirement and achieving their financial goals.

Unfortunately, fewer than half of employees receive education or advice on their equity compensation, which means companies are missing a big opportunity. As UBS succinctly puts it, “Employees don’t value what they don’t understand,” and right now, companies need every possible advantage to attract talent.

That said, communication is critical. Here are seven employee communication strategies companies should consider in order to make equity work as a perk:

1. Clearly explain the offer. If equity is part of your new-hire offering, include educational materials in your pre-hire communication. Not all grants have the same vesting terms, so providing details on exactly what they can expect can set the right tone upfront and demonstrate that you are invested in making sure prospective employees have all the information and resources they need to make the right decision.

2. Provide access to resources. Nearly three-fourths of employees say they want access to online education and tools to manage their equity, and 60% want access to self-paced online training. Providing these resources—either by partnering with your equity platform provider or creating your own—can help employees understand their plan and increase its perceived value. Be sure to think about mobile as well, so that employees in the field have easy access.

3. Offer in-person sessions. Even with strong digital resources, nearly 70% of employees want to work with a financial advisor when it comes to an equity plan. Having someone to discuss ideas and individual situations is critical in making these very personal decisions. Invite your plan admins in for a series of employee roundtables or brownbag lunches to talk with staff in small groups and make time available for one-on-one conversations.

4. Cultivate culture. Equity is attractive because it rewards loyalty and long-term investment in the company’s growth, and that growth is fueled by a strong company culture. In fact, the UBS study shows that employees who rate their company’s culture high also have a higher perceived value of their equity awards. To drive strong value, make it a central part of your culture to demonstrate to employees exactly how their work directly contributes to company growth. That will in turn provide motivation, keep them invested and reinforce retention.

5. Adapt information for different audiences. Not everyone comes to equity compensation at the same level. You may have new hires who hold equity in multiple previous employers, and some who’ve never been offered shares before. Use employee polling to gauge your team’s level of understanding and then design sessions geared for their needs. Equity can be extremely complex and for some, it may be overwhelming. Don’t assume everyone has the same level of financial knowledge. Figure out where they are and meet them there with appropriate education.

6. Break it down. Especially for those with little to no equity experience, it can feel like a foreign language, especially if math, finance or investing isn’t their interest. This can quickly turn a perk into a burden, particularly if employees don’t understand the implications of selling their vested shares. Simplify equity topics into bite-size pieces and deliver them as snackable content. Make short videos, animations or one-pagers available as on-demand resources so that they can refer back to specific topics when certain events come up, like tax time or when their awards vest.

7. Provide timely reminders. Providing equity compensation isn’t a one-time thing—there are events throughout the year and over the course of an employee’s tenure when they’ll need to take action or make a decision. Providing timely reminders and those snackable resources at the appropriate intervals—at tax time, vesting period, etc.—can keep them on top of things and help them make the best of this valuable investment. Tying reminders like IRS reporting, the impact of selling, and more to the calendar year, or even your HR database to remind employees when it’s time to exercise options, help them maximize their options and minimize risk.

Just like other job perks such as healthcare and wellness benefits, equity compensation is only effective if employees actually take advantage of it. But, if they don’t understand the value of equity or how to capitalize on it, it’s unlikely to provide much of an incentive or enticement.

Deploying a strategic, ongoing communications campaign to promote the advantages of equity—even before they’re hired and throughout the employee lifecycle—can keep your team educated, engaged and invested in the success of your company.