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Why Companies Issue Stock to Employees

Why Companies Issue Stock to Employees

Why Companies Issue Stock to Employees

A great way to start the investing game is to try it out somewhere you are familiar with: the company you work for. Not only does it mean you are invested in the future of your company, but you will also get discounts and some perks for showing you are a loyal employee. More than 10,000 firms in the UK now take advantage of different schemes to sell shares to their employees (!!). Companies issue stock through tax efficient schemes which means that the Treasury is losing more than £880 million pounds a year, but apparently it is well worth it for the following reasons:

1. Increase in motivation and loyalty

Since you now own a tiny portion of the company, you feel much more attached and dedicated to it: if the company does well, the share price goes up and so does your money (surprise surprise). As the managers feel more motivated and interested, the staff lower down the chain start adapting to the vibe increasing the company’s overall productivity. The Treasury doesn’t need to worry; as people work harder, their incomes increase, meaning a bigger portion of income tax for the good old taxman.

motivated employee companies issue stock

So motivated you’ll even give a thumbs up to the camera

2. Aligns interest of staff with shareholders

So now you own your share of the company! Take a moment to notice the ‘own’. You have suddenly become a shareholder, someone who owns a portion of the company. The performance of the company affects you even more, meaning you will act and think more like an owner than just staff. As the shareholders and staff discuss company issues, the staff will also be sharing the shareholders’ viewpoint. Instead of a ‘Let’s take this humongous risk’ it’ll more be like ‘Hmmm, gotta increase the value of this company’. Similarly to the last point, this attitude, encourages the staff to work harder and yet again, you guessed it, increases productivity.

3. Low commission and discounts

As mentioned in the introduction, the huge benefit of owning shares in the company you work for means buying them in the first place at a much better discount. Depending on the scheme used (SAYE, EMI) the benefits can go to tax-deferred plans and therefore save you even more money on the long run. If you decide to sell the stock right off the bat, you automatically get profit thanks to the discount. Pas mal.

investing companies issue stock

Be this guy

Owning stock from the company you work for is in general a great idea, but as always, it is important to make the decision from an objective point of view. You have to analyse risk tolerance and your different investment objectives, as must be done with any investment plans. If you have faith in your company and want to try some investing, then for all means buy the shares on a discount. Realise that it’s a win for your company, and it’s a win for you. In general, Forbes recommends putting 10% of your total portfolio into the company you work for, so it might be worth a check!




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