Fubon Financial will comprehensively enhance employee stock ownership trust benefits starting from January 1, 2025. In addition to adding new grade levels, the amount of provision for each grade level has also been increased across the board. The company also maintains 100% relative provision. It is expected that Fubon Financial will increase public provision by approximately NT$ 300 million each year, bringing the cumulative annual provision to public provision to approximately NT$ 800 million, an increase of more than 60%.
Bank SinoPac will officially implement the "All Employee Stock Ownership Trust" from January 1, 2025. For those who have worked at Bank SinoPac for more than 6 months, regardless of rank or seniority, the company will allocate a fixed bonus of NT$ 1,200 every month is transferred to the trust account to purchase SinoPac Financial Holdings (2890.TW) shares. Employees can withdraw their deposited shares when they retire or resign, which is equivalent to a salary increase for employees and they become shareholders. About 6,800 employees across the bank enjoy this benefit.
In fact, in order to attract and retain outstanding talents, more and more companies have introduced diversified welfare measures, among which "Employee Benefit Trust" are the most common. Enterprises such as SinoPac, Taiwan Cement Corporation (TCC), China Steel Corporation, Chunghwa Telecom, Taiwan Mobile, Acer, BenQ and Qisda have all implemented it.
What is an "Employee Benefit Trust"? In short, "employees allocate part of their salary every month and combine it with the company's bonus to buy stocks or funds in a regular fixed amount." For example, if an employee withdraws 2,000 yuan to buy stocks, the company will subsidize 50% of the employee's withdrawal as a bonus, which is 1,000 yuan. A total of 3,000 yuan will be invested in the stock market that month.
In assisting enterprises and private schools in implementing employee benefit trust business, Chinatrust Banking Corporation (referred to as CTBC Bank) is the largest employee benefit trust custodian in Taiwan, with a market value of assets under management of nearly NT$ 200 billion.
CTBC Bank's Corporate Trust Department stated that employee benefit trust are divided into "Employee Stock Ownership Trust" and "Employee Benefit Savings Trust" based on the type of company implemented and the subject of investment. "Employee Stock Ownership Trust" are limited to listed companies, and the investment targets are limited to the stocks of their own listed companies; "Employee Benefit Savings Trust" are mainly adopted by non-listed companies, schools, professional associations and other groups, and the investment targets are relatively diverse. Including listed OTC stocks, domestic and foreign mutual funds and deposits.
| Employee Stock Ownership Trust | Employee Benefit Savings Trust |
|---|---|
| The implementation is limited to listed OTC companies, and the investment targets are limited to the stocks of their own listed OTC companies. | It is mainly adopted by non-listed OTC companies, schools, professional associations and other groups. The investment targets are relatively diverse, including listed OTC stocks, domestic and foreign mutual funds and deposits. |
Among the two, employee stock ownership trusts are relatively large. Different from one-time reward mechanisms such as dividends or year-end bonuses, employee stock ownership trusts purchase stocks in a fixed amount over a long period of time through a special trust account. The trust operator keeps the stock property until employees retire. . This mechanism allows employees to spend their bonuses without being able to get them, allowing them to truly save their bonuses and fully prepare for retirement.
In addition, trust operators will automatically buy new shares from cash dividends issued each year, accumulating them to create a compound interest effect. CTBC Bank was approved to operate the "Employee Stock Ownership Trust" business in 1992, making it the first bank in Taiwan to launch the "Employee Stock Ownership Trust" business. The Corporate Trust Department of CTBC Bank stated that some employees retired from CTBC Bank after nearly 30 years of service. During this period, the net stock value and dividends accumulated by the shareholding trust were quite amazing, which was enough for them to live a good retirement life, which is equivalent to the government's In addition to the labor pension mechanism, there is another layer of protection.
The recent ESG craze has also led companies to promote employee benefit trusts. According to CTBC Bank statistics, the number of entrepreneurs who will provide guidance on the implementation of employee benefit trusts in 2021 has hit a record high, an increase of more than 40% compared with 2020.
The Corporate Trust Department of CTBC Bank stated that the 2021 "Corporate Governance Evaluation Indicators" of the Stock Exchange mentioned that if companies implement an employee benefit trust system, they can get extra points in the evaluation. When employees buy stocks of their own company, they change from "employees" to "shareholders". The two have a closer financial connection, that is, "if the company performs well, the stock price rises, the employees will naturally earn more." When the performance created by hard work is , can be truly reflected in corporate performance and stock prices, and the centripetal force of all employees will be enhanced, forming a long-term positive incentive cycle.
If a company wants to invest in an employee stock ownership trust, what should it do?
What should a company do if it wants to invest in an employee stock ownership trust? CTBC Bank stated that the first step is for the board of directors to approve the "Employee Stock Ownership Trust" plan, including: company bonuses, the ratio of employee withdrawals, and the scope of covered employees.
The second step is to enter the implementation process of employee stock ownership trust (as shown in the figure). Employees serve as the initiators, establish an "Employee Stock Ownership Trust Meeting", and recruit employees to join as members. Only members can participate in the "Employee Stock Ownership Trust" plan.
The third step is for the representative of the shareholding association (employee) to sign a trust contract with the trustee (trust operator), and the trustee opens trust securities and bank accounts in the name of the special trust account. After that, the shareholding will deduct "employee withdrawal funds" and additional "company bonuses" provided by the company from the employee's salary income every month, and will be delivered to the trustee to purchase company stocks in fixed amounts on a regular basis.
▲Employee Stock Ownership Trust
▲Employee Benefit Savings Trust
Generally speaking, what companies are most concerned about is how much bonus should be set aside as an employee stock ownership trust. The current common practice is to "determine the amount of self-withdrawal funds according to the rank." Each rank has different upper limits for self-withdrawal funds, for example: 6,000 yuan for vice president level, 5,000 yuan for manager level, 3,000 yuan for senior employees, and 2,000 yuan for general employees. This system usually extends to all full-time employees. The company then provides incentives to employees based on their self-withdrawal funds, ranging from about 20% to 100%. For example, if the average employee's salary is 2,000 yuan, the company will provide a 20% bonus, which is 400 yuan.
CTBC Bank stated that the amount of bonus withdrawals depends on the company's financial condition, employee salaries, the upper limit of withdrawals and the fluctuation of the company's stock price. Some companies with a relatively low upper limit for self-withdrawal funds will give 100% of the bonus, that is, the company will give employees as much as they can withdraw for self-withdrawal funds, which is more attractive to employees to participate; if the company's stock price fluctuates greatly, the company rewards If the funds are not high, employees will think about the possibility of buying stocks at low prices and reduce their willingness to participate in shareholding trusts. In addition, it should be noted that the minimum amount of self-withdrawal funds is set too high, which will also cause a financial burden for colleagues with lower incomes.
The above process, whether it is designing the regulations of a shareholding trust or establishing a shareholding committee, can be assisted by a trust service provider. According to CTBC Bank's experience in undertaking the shareholding trust system, if the following three points are achieved, 80% to 90% of employees will usually be willing to respond to the shareholding trust plan: first, the relative withdrawal ratio of corporate bonuses is high; secondly, the implementation of employee Fully communicate with employees before holding a employee stock owership trust, and hold briefing sessions to answer everyone's doubts; third, information transparency, the trustee (trust operator) can provide a digital platform for employees to instantly check the investment amount, number of stocks, and rate of return.
In addition to employee stock ownership trusts, increasing "non-universal" benefits will help retain talents
However, if a company wants to retain talents, employee benefit trust alone is not enough, because it is a "universal, company-wide welfare system" that can give the company more advantages in attracting talents compared with its peers. If you want to retain talents as the goal, you can consider the five types of employee stock ownership mechanisms in the Company Law: employee stock ownership with dividends, cash capital increase to retain employee stock options, employee stock option certificates, buying back treasury shares and transferring them to employees, and restricting employee rights. New shares provide an exclusive reward mechanism for technical or professional talents.
CTBC Bank, for example, takes "new shares with restricted employee rights" as an example. When a company issues new shares, it allows key talents to obtain new shares at a price lower than the market price or for free, and at the same time sets vested conditions, such as what percentage of the shares can be released after three years of service. Transfer restrictions, if the agreement is violated, the number of previously subscribed shares will be returned to the company, increasing employees' willingness to stay.
"Employee stock subscription certificates" are an agreement between the company and its employees that at a certain time in the future, employees have the right to subscribe for company shares based on the agreed price and quantity. For example, in 2022, company A will give employees stock options that are lower than the market price. If employees If they are still employed in 2025, employees can exercise their stock options and buy several shares of Company A at a price lower than the market price per share. Companies can use this as an inducement to drive employees to work hard to make money for the company and raise the stock price to earn a high price difference on future stock purchases, thereby achieving the purpose of retaining talents.
CTBC Bank stated that because each company has different finances, growth periods, and industrial conditions, the reward and reward systems required are also different. If we can discuss with banks and professional financial consultants and design appropriate reward and reward plans, we can better achieve recruitment and recruitment of talents. The effect of talent retention.
CTBC Bank Corporate Trust Department
CTBC attaches great importance to the needs of corporate customers. In 2004, it set up a dedicated unit "Corporate Trust Department" to provide various asset trust, custodian banking and stock agency services for enterprises, employees and shareholders. It is currently the only one in the banking industry that operates under the same unit. A business that also provides trust, custody, and agency services.
