ESOP: EMPLOYEE OWNER INFO

WE ARE PROUD TO BE A 100% EMPLOYEE-OWNED COMPANY THROUGH PARTICIPATION IN THE EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)

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This program provides long-term financial security to all SPEP employees in the form of a vested stake in the overall success of the company. In turn, this fosters a culture of customer-focused teamwork.

What is an ESOP?

An Employee Stock Ownership Plan (ESOP) is a type of employee benefit plan. In an ESOP, an organization creates a trust fund and contributes shares of its stock to the fund. Employees of the organization are provided with retirement savings through automatic investments in the company’s stock.

Members of the SPEP family obtain shares through a qualified and defined contribution plan. Shares are also awarded as part of performance-based or longevity-based bonuses to motivate employee retention and focus on company growth. SPEP employees receive stock as part of their standard benefits package with zero out-of-pocket cost. In addition, SPEP has 401K matching and has implemented an annual profit-sharing program for its employees/owners.

An ESOP program has numerous benefits when compared to other benefits plans. Stock contributions are tax-deductible, as are cash contributions. In S corporations like SPEP, the percentage of ownership held by our ESOP program is not subject to annual income tax at the federal level. Since SPEP is 100% employee-owned, it means we hold a “tax-deferred” status and there is no federal tax on our profits. This allows us to pass along substantial savings to our customers versus our competitors.

Perhaps most importantly, the ESOP promotes a feeling of unity throughout the organization. Every member of the SPEP family can have their voices heard, which encourages collaboration and teamwork. This results in an empowered workforce motivated towards the common goal of providing value to our customers.

Why Did SPEP Become ESOP?

What prompted SPEP to transition from a traditional privately owned company to become an ESOP? Our founder and original owner made this decision in 2005 because it offered optimal benefits for members of the SPEP family.

Unlike companies that rely exclusively on traditional pension or 401(k) investment programs, SPEP is built around the belief that the employees ARE the company. The ESOP program promotes loyalty towards the SPEP brand and one another. Each of us has a vested interest in the success of the company, regardless of which role we fill within the SPEP family.

In addition, the high morale fostered by the ESOP program allows the company to better serve its valued clients. This is reflected in the fact that ESOP companies like SPEP consistently outperform non-ESOP organizations on average.

According to a study conducted by the National Center for Employee Ownership, ESOP organizations experience better overall sales and more sales per employee. Researchers found that productivity per employee improved 4% – 5% at ESOP companies compared to non-ESOP businesses and had 25% higher job growth over a 10-year period.

The ESOP also encourages top-tier talent to join and remain a part of the SPEP family. These benefits establish a promising roadmap for a lasting generational legacy at SPEP.

General Statistics About ESOPs

The concept of ESOPs was developed in the 1970s. This strategy quickly gained traction amongst businesses across various industries. ESOPs accomplish exactly what Congress intended them to: create jobs, generate economic activity, promote retirement savings, and support from both sides of the aisle. We have compiled some key statistics about ESOPs below to provide further insights into this program.

  • There are approximately 10,000 ESOPs in place in the U.S.
  • These programs cover roughly 10.3 million employees.
  • Approximately 4,000 companies, including SPEP, are 100% employee-owned.
  • On average, companies contributed 11.8% to their respective ESOPs.
  • Nearly one-quarter (22%) of ESOPs are in the manufacturing sector.
  • ESOP companies contributed 75% more to their program when compared to companies that use a traditional retirement plan.
  • Employees/owners are 4x less likely to be laid off.

At Sierra Pacific Engineering and Products, the employees are the company. This is due to the adoption of the ESOP program. Together, we work to further the mission of SPEP while simultaneously providing top-quality goods to our valued clients.

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