What Is Employee Ownership? Top 5 FAQs Answered
When retirement time comes around, people look to their company pensions and 401(k) plans. However, these days those things often arent enough.
Just as well, companies are looking for more ways to motivate and incentivize their employees and make them feel like they have a reason to work and remain with the company.
Now more companies are trying to make their employees more invested with the idea of employee ownership. But what is it? Here are five of the most frequently asked questions about employee ownership plans.
1) What Is Employee Ownership?
Employee ownership is when shares of a company’s stocks are owned by the employees that work for the company. This is the most common form known as an employee stock ownership plan or ESOP.
It incentivizes the employees to not only work hard but also stay with the company for the long haul. Several studies showed that companies that have employee ownership tend to perform better overall.
2) How Does It Work?
An ESOP acts like a retirement plan like a 401(k). It invests in the company’s stock and holds in a trust for the employees. The ESOP might own the entire of the company stock or a portion of them.
Over time the employees will accrue shares and will get the returns through a buyback from the company when they choose to leave or retire.
3) How Is It Different From 401(k) Plans?
They are different in two important ways:
1. ESOP invests in the company’s stock whereas 401(k) plans invest in various mutual funds.
2. Second, ESOP contribution comes only from the company. This makes them free to the employees. 401(k) plans, however, allow employees to invest their own money into the plan and the company may or may not match it.
For more information and details about 401(k)s, you can look here.
4) How Can I Increase the Value of My Employee Ownership Portfolio?
The value of an ESOP is mostly based on the value of the company’s stock. Therefore, anything you as the employee can do to help your company succeed and grow will aid the ESOP account balances to also increase in value.
5) Is Employee Ownership Regulated by the Department of Labor?
Under the Employee Retirement Income Security Act of 1974, retirement plans are regulated by the government and have rules about how companies can handle retirement plans.
However, employee ownership isn’t applicable under this law. Therefore Employee stock ownership is free of this set of regulations. It’s regulated under State Trust Law. Under these laws, they respect the wishes of the trustor which is you.
Grow You and Your Company’s Value
Employee ownership is a great means to keep employees invested in the company as well as give them something to look forward to utilizing in the future.
As an employee, know your worth and make sure you can receive something like this for your company. After all, who wants to be part of a company you cant invest yourself in? Get invested today.
For other informative articles like this one that’ll help you increase your value, be sure to browse the rest of our blog.