A 2011 report from the National Stock Professionals found 66 percent of companies surveyed noted less than 40 percent participation in employee stock purchase plans. These company-run stock plans allow employees to purchase stock through the company at discounted rates.
Given improving economic conditions, many companies are beefing up ESPP options, boosting employee benefit plans. Here are five reasons why Fidelity says it's time to give these vehicles a second look.
1. The Discount
Recommended For You
Although discounting rates vary, employees can take 5 to 15 percent off market price. That means the chances are good employees will make money off their purchased shares. Should the share price drop, employees can take advantage of dollar-cost averaging and purchase more shares at lower prices. According to a 2012 Fidelity survey, there's a growing trend among companies to provide even deeper discounts over the next few years.
2. Automatic payroll deductions
The increasing popularity of enlisting automatic payroll deductions for ESPP means employees don't have to agonize over the purchase process. Some companies allow employees to set aside as little as 1 percent of their paycheck toward ESPP. Lowering barriers to entry helps ESPP cast a wider net of employee participation.
3. Another way to save for retirement
Helping offset traditional retirement savings, ESPP offer employees diversity and a chance at company ownership. Fidelity found a majority of ESPP participants — 57 percent — are earmarking that money for retirement.
4. Keeping employees happy
With an increasing number of companies available on the public markets, ESPP plans are helping more employees gain stock. A 2013 Connell & Partners study of recent IPOs found 40 percent of companies offered ESPP and all of those at a 15 percent discounted rate. Companies are finding an attractive ESPP are a strong tool for attracting talent, boosting morale and bolstering a benefits package. 
5. Accessibility
Proceeds from ESPP are far more easily accessed than a traditional 401(k). Although taxes apply, there are no penalties or repayment requirements. And for those not earmarking stock gains for retirement, a 2012 study by Richard Day Research/Market Probe of Chicago found many employees using proceed for a variety of financial needs including college tuition, mortgage down payments and other life expenses.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
