MUFG Pension & Market Services
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EPS Insight 2021

29 April 2021 / Equity Plan Solutions

Welcome to the fourth edition of EPS Insight.

In 2020, the COVID-19 crisis has acted as a catalyst for more than 135,000 employees to get involved in share schemes according to Link Group’s new Equity Plans Solutions report. 38% of companies offered a COVID-19 plan globally, seeing many employees become shareholders in their companies for the first time, adding another dimension to employee engagement.

The Equity Plans Solutions 2021 Insight Report looks at the impact of COVID-19 on the employee share plans Link Group manages on behalf of clients and how those companies have utilised employee share plans as a tool to retain, motivate, and reward their employees during these exceptional times.

The pandemic created an unprecedented global economic crisis, with many companies finding themselves unable to continue to pay full wages for a period of time or uncertain about financial performance in the future. This prompted many companies to reward staff with shares or share-rights for taking temporary pay reductions, which were either agreed upfront with the contractual shift to reduce pay, or offered retrospectively.

40% of Link Group’s clients within the ASX300 took the decision to offer employees equity as a result of the impacts of COVID-19. Around two in five (38%) of the companies offered the plan globally.

According to the findings of the report, the most common types of awards were share-rights under a short-term incentive plan, as well as gift shares allocated under the tax-exempt share plan.

Nearly one in six (15%) of the gift shares were offered on a post-tax basis with no further restrictions and a three-year restriction under the qualifying tax-exempt plan was the most popular scheme. Notably, four in five (80%) of all share-rights awards offered to employees were allocated with a time-based hurdle. Three quarters (75%) of companies have an employee share plan trust to hold the shares on behalf of participants.

This trend within the market not only helped ensure that the financial impact of COVID-19 on employees could be somewhat mitigated by longer-term financial rewards, but it will also likely reap wider benefits such as enhanced employee retention, a shared sense of purpose, and increased productivity.

Tom McCarty, General Manager Equity Plans Solutions, part of Link Group comments: “The way businesses have adapted to manage the consequences of the last 12 months has provided a welcome shield to many employees across the world. Many of us have also been humbled by the tireless work of healthcare employees, grocery store and other essential workers such as delivery drivers during the COVID-19 pandemic.

“As companies adjust to the ‘new normal’, it will be fascinating to see whether the upward trend to reward shares or share-rights to staff will continue once the economy is back at full steam and such pay structures are no-longer a necessity. While such a shift would be hugely rewarding for businesses and employees alike, the fact is that we now have many employees becoming first time shareholders. Employee engagement around share ownership will be key for the foreseeable future. COVID-19 has transformed not just employee agility but employee engagement too. Those employers that successfully adapt to the new environment will reap the rewards.”

Key takeaways

  • In the past twelve months, 40% of Link Group’s clients within the ASX300 offered employees equity as a result of the impact of COVID-19 – equivalent to 135,000 Australian-based employees
  • 38% of these companies offered the plan globally
  • 80% of all share-rights awards offered to employees were allocated with a time-based hurdle

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