Did you know that October is Employee Ownership Month? It’s a great way to not only learn how an ESOP works, but to also recognize and celebrate the benefits that come with being an employee-owned company.
One of the reasons we’re excited to celebrate Employee Ownership Month is because LGC has an Employee Stock Ownership Plan (ESOP). This went into effect in 2022, with LGC employees effectively owning 30% of the business.
Here’s How an ESOP Works in Honor of Employee Ownership Month
Now on to what you really want to know: how an ESOP works. Part of its definition is in its name – employee stock ownership. Workers receive shares of stock as part of this benefit plan, whether the company is publicly traded or privately owned.
How an ESOP works is that it’s effectively a trust fund and “can be funded by companies putting newly issued shares into them, putting cash in to buy existing company shares, or borrowing money through the entity to buy company shares.” (via Investopedia)
To see the financial benefits of an ESOP, (in most cases) the employee must do two things. One of them is vesting their shares. Vesting is the process which gradually earns employees their full ownership through certain conditions – often related to the length of time you’ve worked/will continue to work at the company.
That doesn’t mean money will appear in your account once your shares are vested. Typically cashing out from your ESOP involves terminating employment, retiring, dying, or becoming disabled and unable to work; but this is all dependent on the details of the plan which you can find in the guidelines.
Now that you know how an ESOP works, consider implementing this benefit plan at your organization. Take it from LGC: We are proud to be an employee-owned company. We wanted to provide a way for our employees to better plan for their future and to understand their direct impact on LGC’s success, and that’s exactly what we did.
Since 2003 LGC has been building connections between businesses with staffing needs and job seekers looking for new opportunities. Our range of solutions include temporary and permanent placements (and everything in between) in a variety of industries. With offices located nationwide, we can tap into a dynamic pool of talented professionals. We have a passion for creating partnerships that last and work hard every day to ensure both clients and candidates reach their employment goals.