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    Want to find a way to increase productivity, sales, employee engagement, culture, and create a high-energy environment for your company? Employee ownership is proven to provide all these benefits and more. And guess what? October is National Employee Ownership Month! That’s right, there is a month dedicated to this advantageous ownership structure. Since we at Holmes Murphy are always looking for another reason to rejoice in a good cause, we’re here to help you Celebrate, and of course, hopefully provide some valuable information.

    One of the most prevalent forms of granting employee ownership is through an ESOP. If you work in an employee-owned business, you more than likely know that acronym stands for Employee Stock Ownership Plan. If you’re not as familiar with this term, in one of my previous blogs I used Investopedia.com to help define it as this: “…a qualified defined-contribution employee benefit (Employee Retirement Income Security Act of 1974 [ERISA]) plan designed to invest primarily in the stock of the sponsoring employer.”

    Many companies use this type of plan as a way to empower their employees. Think about this for a moment. In the case of ESOPs, employee compensation is tied to company performance which results in higher performing employees who take more ownership (literally) in their work product.

    ESOPs really do provide undeniable benefits, including increased productivity, increased sales, stronger communities, higher employee retirement account balances and wages, and the list goes on. Plus, ESOP companies are more likely to stay in business and less likely to lay-off employees during a recession. But, don’t just take my word for it, check out the National Center for Employee Ownership’s “Visual Guide to Employee Ownership.”

    A couple other interesting statistics I found via the ESOP Association’s site:

    • There are approximately 7,000 ESOPs in place in the U.S., covering nearly 11 million employees.
    • The size of a company’s annual contribution to its ESOP has been found to be a key factor in determining the extent to which ESOPs are believed to have a positive impact on employee owners’ attitudes toward their work. In 2015, on average, companies contributed 11.8% annually to the ESOP. The numbers also show that 59.7% of companies are contributing 6% or more annually, and 40.3% contribute over 10% annually to the ESOP. These contribution numbers indicate that a majority of ESOPs are making significant contributions to employee owners’ accounts.
    • An overwhelming majority of ESOP companies have other retirement and/or savings plans, such as defined benefit pension plans or 401(k) plans, to supplement their ESOP.
    • Total assets owned by U.S. ESOPs is estimated to be approximately $940 billion at the end of 2011.

    Those statistics are impressive, and it only gets better. ESOPs provide owners of a company opportunities to grant ownership to their valued employees, a vehicle to transition ownership of a company from retiring owners, and valuable tax benefits for the company and its shareholders.

    I bring this up topic up because if you already have an ESOP or are thinking about taking a step toward an ESOP, you’ll want to be armed with the knowledge to help you make the right decisions. Your employee owners are counting on you to adequately protect their largest investment and their family’s livelihood. While there are a ton of advantages to ESOP structure, there are also important factors you need to keep in mind and exposures you’ll need to understand.

    Interestingly enough, Holmes Murphy fully understands this topic, because…you guessed it…we’re employee-owned, with more than 100 employee owners! We pride ourselves on our culture and employee engagement, empowerment, and experience. These are important traits of ESOP companies. We’d be happy to sit down with you to help determine if you’re properly protected for the additional exposures presented by this unique ownership structure. There are many intricacies to understand when designing a risk management program for ESOPs. Making sure your insurance program fits your needs and is tailored specifically for your organization are critical. We specialize in crafting custom programs for our clients and would love to help another employee-owned organization ensure proper protections. Let us know if you’d like to talk!

    Congratulations to all employee-owned companies for making a difference in your communities and empowering your biggest asset…your employees! Cheers to you!

    Published on: 10.23.17

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