Examples and benefits of granting equity awards to a broader workforce

Equity awards are typically reserved for senior management. However, more and more companies are realizing the benefits of granting equity to their broader workforce, including hourly workers. Equity awards, such as Restricted Stock Units (RSUs), are a form of long-term incentive compensation that vest over several years. Companies use these awards to recognize performance, help employees build wealth, and foster loyalty and pride in the workplace.

In this article, we will explore how companies have successfully implemented equity programs for hourly workers and discuss important considerations for organizations looking to do the same.

Companies embracing equity for all

Verizon

Verizon has a program called “Stock Together,” which grants equity awards to all employees, including hourly workers. Verizon has experimented with granting equity broadly in the past. In 2000, the company made headlines for providing stock option “Founders’ Grants” to all 210,000 employees. Then, in 2018, Verizon awarded Restricted Stock Units (RSUs) to full-time and part-time employees, which were fully paid in February 2020. Building on the success of the 2018 pilot program, Verizon officially launched Stock Together in 2020.

Verizon stated that the purpose of Stock Together is to "create an opportunity for all of us to share in the success of Verizon and the value we help to create." All employees, regardless of full-time or part-time status or location, are eligible for this program as long as they are actively working on the grant date.

The value of an individual’s award is based on their job level, work location, and hours worked. Awards vest in one-third increments over a three-year period.

To effectively communicate the program to all employees, even those who might not be familiar with how equity works, Verizon partnered with Three Summers Creative, an integrated marketing agency, to create a website and videos that explain the program in a clear and engaging manner.

Samantha Hammock, Verizon’s CHRO, credits the Stock Together program as a significant contributor to the company’s long-tenured workforce (average employee tenure is 13 years), demonstrating the positive impact of equity programs on loyalty and retention. Verizon employees have been quoted saying that the Stock Together program has helped “build generational wealth” and furthermore supported their “personal goals and needs.”

Starbucks

Since 1991, Starbucks has offered equity awards across their employee population through its Bean Stock program. Eligible partners (most full- and part-time employees) are granted RSUs that turn into shares of Starbucks stock over a two-year period. Starbucks firmly believes that every partner who contributes to the company's success should have a stake in it.

There are many stories highlighting the positive impact of Starbucks’ Bean Stock program, from allowing employees to pay for weddings and vacations to helping them cover other, unexpected significant expenses. One partner, a shift supervisor from Florida, wrote on Starbucks’ blog “I’ve used Bean Stock to pay off my car and pay for my laptop for school – it’s helped me so much.” Furthermore, that employee indicated that while he’s a fan of the program, he emphasized the importance of ensuring employees understand equity awards and so he serves as an unofficial ambassador of Bean Stock for his colleagues.

Bank of America

Bank of America is in its third year of granting RSUs to frontline employees. In 2024, approximately 97% of the bank's workforce will receive restricted stock bonuses that vest over four years and are worth a collective $800 million. This special long-term compensation comes alongside Bank of America’s commitment to raising its minimum hourly wage, demonstrating that equity awards can complement other efforts to improve compensation for hourly workers.

Amazon

Amazon previously had an RSU program for hourly employees, but it was phased out and replaced with a direct employee stock purchase program (ESPP). Amazon made this change based on feedback from hourly fulfillment and customer service employees who preferred the “predictability and immediacy of cash” rather than longer term and variable equity awards.

The Amazon example highlights the importance of considering the preferences and needs of hourly workers when designing compensation programs. Mercer’s 2024 Global Talent Trends report states that the top reason for burnout, as reported by employees, is financial strain, with 43% of respondents citing it as a significant factor.

While equity awards can be a valuable form of recognition and wealth creation, companies should first consider their employees' basic financial needs and preferences. Equity awards are not a substitute for competitive hourly compensation.

Some things to consider

Delivering value to hourly employees with equity is not a one-size-fits-all approach and it won’t work in all companies. Here are some things you should consider before making the decision:

• Employee preferences. Take the time to listen to employees using digital focus groups or surveys. Understanding the wants and needs of your workforce segments will enable you to consider equity as a component of your holistic total rewards strategy. You may discover that equity awards are not the optimal vehicle to meet employee needs.
• Communication. Implementing an equity program for hourly workers requires strong change management and communication efforts. Equity awards are generally a new concept for non-executives. If your employees do not understand the value of their rewards, then you will not reap the potential benefits of retention, engagement, and loyalty.
• Vesting. A shorter-term vesting schedule may be more appropriate for the hourly workforce. For example, a vesting period of two years, rather than the standard three- or four-year period, can balance the objective of encouraging retention with the need to provide a reward soon enough to be exciting and valued by employees.
• Competitive base pay. Ensuring that base pay is competitive and reasonable is a prerequisite to introducing equity awards and enabling your organization to attract talent. The competitiveness of compensation can be assessed via a market benchmarking study.
• Explore and evaluate. Start by conducting a pilot program and evaluating the return on investment via analysis of workforce turnover, engagement, and other talent metrics. A pilot will help you build the business case for broader equity participation within your company and should be assessed and refined to maximize effectiveness of the program.

Let the experts help

Extending equity awards to hourly workers can be a powerful way to recognize their contributions, build loyalty, and empower them to have an “owner” mentality in the workplace. Public companies Verizon, Starbucks, Bank of America, and Amazon have implemented equity programs for hourly workers, each with a distinct approach. Is this something you are considering for your workforce? Let us help you put together an assessment to see if it’s the right step. We’d love to hear from you at 855-286-5302 or surveys@mercer.com.

About the Authors

Juliet Archer is a Principal in Mercer’s Career business in Los Angeles. Juliet specializes in incentive design, executive compensation, and total rewards strategy. Her passion is helping clients align their short- and long-term incentive programs with their business strategy to drive results.

Leilani Wesley is a Sr Analyst in Mercer’s Career business in Los Angeles. Leilani has experience in incentive design, job architecture, and total rewards strategy.