With the profound implications a recession has on businesses around the world, companies need to prioritise the maintenance of their overall business health via employee retention and the management of short-term cash flow. It is essential for businesses to consider alternative ways to retain their staff so they can maximise existing talent.
This involves meeting the needs of employees, which have definitely evolved post-pandemic. Special focus needs to be placed on these evolving needs, which include offering perks to motivate employees and increase their loyalty towards the business, making sure that they feel valued for their hard work and encouraging them to continue contributing to company success.
In the midst of a recession, it is also crucial to stay on top of your cash-flow management and business operations, ensuring that all your processes can still be done effectively but with significant cost savings. In terms of stocks and shares, your company needs to be aware of the impact this has on your financial stability.
What Happens to Shares in a Recession?
One of the most important things for businesses to note during a recession is that stocks tend to fall in value, impacting company profits and investments. As such, it becomes even more essential to keep all your financial management up-to-date, and ensure good control over all your cash flows so your money is being put into the most profitable places. This might involve altering the way your employees are compensated, which could contribute to the preservation of a company’s share value.
A private equity firm that is trying to limit cash outflows during a recession might also consider relying more heavily on Employee Equity Plans as a form of compensation in order to conserve cash. Increasing the role of equity compensation can provide a way to retain employees by giving them a long-term stake in the company’s success, which can be an attractive proposition for many if they believe in the future of the company.
The Benefits of Employee Equity Plans
Offered as an incentive and allowing employees to share the growth and success of the business, Employee Share Schemes are a versatile and valuable way to attract, retain and motivate employees. Additionally, utilising employee equity can be a great strategy to help improve a business’s cash flow.
During a recession, there are many benefits to offering employee equity as a method to reward and motivate your employees. Some of these benefits include:
- Aligning the interests of employees with the interests of the company;
- Attracting and retaining employees without high costs, encouraging employees to stay with the company for a significant amount of time due to vesting;
- Allowing employees to buy shares in the company in the future;
- Improving company cash flow; and
- Tax benefits for both employees and the company.
Whenever issues of a potential recession are being felt across the economy, many companies should consider utilising Employee Equity Plans, such as employee stock options, in lieu of salary payments, allowing employee retention and an immediate reduction of the financial impact on their business.
Employee Equity Tips for Businesses
Here are 3 tips from BoardRoom to consider when introducing employee equity in lieu of salary payments:
- Issue the same amount of equity as the employee has forfeited in salary payments;
- Ensure the vesting date aligns with the date the employee’s salary reverts back to their normal pay; and
- A clear communication plan is essential when rolling out a new plan to employees.
Choose BoardRoom for Your Employee Equity Plan Needs
With over 400 Employee Equity Plans under management, BoardRoom has extensive experience in designing, implementing, and managing Employee Equity Plans and Share Schemes. If you would like to find out how BoardRoom’s services can help your business improve employee engagement and achieve business growth, please do not hesitate to contact us.