While PayPal didn’t explain the motivations behind its ‘Inducement Equity Incentive Plan’, many suspect the scheme was rolled out to retain new workers, after the company was forced to make mass lay offs in several offices around the globe. Giving employees a measurable stake in the business is an effective way to keep workers loyal. Yet, with new research suggesting that flexible working conditions may be the best way to retain top talent, the impact of this plan still hangs in the balance.
PayPal Hands Out Stock to its New Workers
As the stock market continues to plunge and tech giants are forced to pump the breaks on spending, companies are thinking of creative ways to keep hold of top talent. In a press release issued last Thursday, the company explained it had already handed out stock awards to 435 non-executive employees on July 15th, after the plan was approved earlier in the month. Out of these workers, 411 employees received a total of 264,598 restricted shares and 23 employees received 1,136 cash-settled restricted shares. Finally, the remaining three employees received 3,619 performance-based shares that value will be determined based on PayPal’s future earnings.
Why Did PayPal Launch this Scheme?
PayPal did not provide any explanation for this plan in its press release, so the company’s exact motivations remain unclear. As a global recession continues to loom, increasing salaries isn’t a viable option for all companies. Instead, handing out stock to employees is another effective way to reward new and existing workers. Not only does it promise them financial benefits when the market recovers, but it also doesn’t come as a massive expense for companies. With PayPal failing to meet growth goals and closing down 4.5 million accounts this year, offering stocks to employees allows them to remain competitive without breaking the bank. However, as the stock market continues to tank — especially within the tech sector — it’s unclear how much PayPal’s scheme will benefit new workers.
Is Stock Sharing the Best Way to Retain Staff?
As the great resignation rages on, tech companies are pulling out the stops to retain their top talent. Many major tech firms have both announced pay rises, with Apple promising retail workers a 45% wage increase from 2018 and Microsoft nearly doubling its budget for salary increases. Moreover, as this recent announcement by PayPal illustrates, more and more companies are also turning to stock schemes to reward workers. However, despite the commonly held notion that cash is the best way to retain talent, new research from the National Bureau of Economic Research (NBER) suggests that employees are more likely to favor flexible working practices over pay increases. A healthier work-to-life balance is proving to be a top priority for modern workers. Therefore, using remote working software and embracing hybrid practices could indeed be the most effective and economical way to reduce resignations. Interested in retaining staff by adopting flexible solutions? Read our tips on how to manage remote employees here.
