Another year end has come and gone! By February, many calendar year ESOPs are in the midst of the valuation and allocation cycle for the previous plan year. You're in a holding pattern, waiting to schedule employee meetings, and distribute participant statements. But it doesn't have to be this way. This is also the time of year when many companies do their annual performance and compensation reviews — which makes it a great time to prepare total compensation statements.
ESOP Participant Statements and the Annual Employee Meeting
Most ESOP companies do a respectable job of conducting an annual employee meeting, handing out participants’ statements, and celebrating the ESOP. The ESOP participant statement is generally the centerpiece of the meeting and provides a great opportunity to communicate the company results and the annual ESOP employee benefit. The CEO is often referred to as the driver of the culture and their participation in this process is a must. A review of the company’s financial results and linkage to the stock price by the CEO and management is an essential part of the process. The annual ESOP participant statement provides a method to illustrate the contributions made to the ESOP during the year and reflects all of the ESOP account activity in the previous plan year. This communication presents the opportunity to present the latest annual ESOP employee benefit level.
The ESOP "Waiting" Season
Just because you aren't ready to communicate the new stock value and allocations for the ESOP doesn't mean there's nothing to say about it during the "waiting" season. One of the objectives of establishing an ESOP and building an ownership culture is to attract, retain, and engage your employees. Since you have already devoted significant time and resources to implement and maintain the ESOP, you should make sure you are maximizing its benefits. This means that you should be communicating the ESOP benefit on a regular basis and certainly more than once per year. One way to fill the void and provide an additional touch point for the ESOP is to distribute total compensation statements.
Total Compensation Statements
Total compensation statements are personalized statements that communicate the total investment that a company makes in its employees so the employees can see the total value of their compensation and benefits.
Total compensation statements are generally presented on an annual basis. These statements can also be referred to as a “hidden paycheck” or “total benefit statement.”
Total compensation statements can come in many formats. It is most common to express employer and employee contributions and the employer benefits in terms of dollars and as a percentage of pay. It is also popular to communicate less tangible benefits like wellness and flextime programs, providing the employee a more complete picture of their “total compensation,” while providing the employer a way to illustrate a competitive advantage in retaining good employees.
Benefits of Total Compensation Statements
Total compensation statements provide a way to keep the ESOP fresh and avoid an ESOP waiting season. While you're waiting for the new ESOP benefit level, remind employees of all the company benefits they received during the prior year.
The statements will help employees understand your benefits structure and give you an opportunity to illustrate the total value that you are providing. It will also provide an annual reminder for employees to see how the company is rewarding them for their contributions, and that their total compensation package is competitive in the marketplace. The ongoing communication can also contribute to increased employee retention rates. Compiling this information and understanding the total employee benefit structure will also assist the company in recruiting new employees.
As an alternative to providing total compensation statements early in the year, you could also wait until the allocation cycle is complete and use them to help fill the void during the summer season, or distribute them during Employee Ownership Month, or at another time that fits into your overall communications plan. This provides another ESOP touch point and an opportunity to showcase the ESOP as one of the centerpieces of your benefits package.
Regardless of when you prepare them, total compensation statements offer another chance to present your ESOP benefit level to your employees, as well as one more touch point and opportunity to celebrate your ESOP!A version of this article was originally written by Aaron Juckett for The ESOP Report.