Recruiting the best and brightest to a privately-owned business is difficult when competing against large corporations who offer candidates an extensive list of incentives to join their ranks. What if you could match some of their financial incentives with a program of your own? That is where phantom stock and equity plans come in.
What is phantom stock?
Phantom stock operates much like traditional stock program. It is an employee benefit plan offered to a chosen group of workers. It has some benefits associated with stock ownership without offering any actual stake in the company.
Most plans have a vesting schedule tied to a predetermined event or point in time, like the sale of the company, retirement or years of employment. The amount of the reward will be directly reflective of the company’s success, encouraging greater investment by employees to push towards it.
In many cases, phantom equity is offered to key employees to encourage retention. But these plans can be a powerful recruitment tool.
Create a phantom stock program
Putting together a benefits package that includes a phantom stock plan could appeal to executive-level workers looking for a new gig. This could put you on a more level playing field with the larger corporations who are recruiting them.
Ultimately, an employee has more skin in the game when incentivized with phantom stock. Unlike in a large organization, their work product can directly impact the success of their company and the value of their holdings. This can also be an appealing incentive for those looking for meaningful involvement in an organization and not just a paycheck.
Using Phantom Stock as a Recruitment Tool
Now that you’ve created a phantom stock program, the next step is to include it as a recruitment tool. There are several ways to communicate this incentive when recruiting:
- Target key positions: You may not want to offer this to all employees, so tailor messaging to the job description to include this incentive.
- Communicate the benefits: Share the specifics of your program in recruitment communications, including how you will calculate the value of the phantom stock, an overview of the vesting schedule and details about what event triggers its payout.
- Emphasize how phantom stock creates “ownership mentality”: Highlight the fact that even though employees don’t own an actual share of the company, this lets them fell like stakeholders who benefit directly from the company’s success.
- Share vesting schedule and payout triggers: Giving specific information around vesting and payout allows perspective employees an idea of when the incentive will most benefit them.
- Explain the valuation process: Define the valuation process of phantom stock shares and explain the methodology behind it.
Another option is to offer a comparison between phantom stocks and traditional equity to emphasize its advantage.
Using phantom stock as an incentive to attract qualified applicants for key positions can be very effective. Offering team members a stake in your company’s future could be a deciding factor for a person weighing new employment options.
Reins is here to help you understand the details of phantom stock programs and how to implement one for your company.
