State Of The Workplace

Equity compensation a key driver of employee retention, while helping employees meet long-term goals

The third annual State of the Workplace Study focuses on the evolving role and significance of workplace benefits as economic uncertainty unsettles both workers and their employers. With continued inflation and market volatility culminating in fears of a possible recession, employees are seeking more support even as employers search for ways to do more with less and drive greater efficiencies.

Key Findings From The Study:

• Achieving long-term goals grows to become most important benefit of equity compensation: Employee views of equity compensation as a driver of long-term investment goals increased to 28% (vs. 24% in 2022), followed by providing an extra source of income and giving a stake in the success of the company.
• Keeping employees engaged: HR leaders (97%) and employees (84%) agree that having a benefits plan that includes equity compensation and stock ownership is the most effective way to motivate and engage employees.
• Equity compensation continues to gain ground: More companies (72%) say they offer some form of equity compensation benefits to some employees (up from 68% in 2022 and 65% in 2021).

“In the decades of work we’ve done with clients, we have seen an evolution in how this benefit—once thought of as a one-time bonus—is now viewed more holistically within an employees’ overall finances as a key driver of long-term investing goals,” said Scott Whatley, Managing Director & Global Head of Equity Solutions at Morgan Stanley at Work. “As equity compensation continues to gain ground, this is a critical insight for employers to absorb, and help inform how they communicate, package and deliver equity compensation throughout their organizations.”

Expanding on trends from the previous year, data indicates that competitive workplace financial benefits have only grown in importance as financial stress emerges as a key concern for employers and employees alike: More than 83% of HR leaders worry that employees’ financial issues could affect their productivity, while 66% of employees agree that financial stress is negatively affecting their work and personal life.

As employees focus more intensely on and look for more from their workplace financial benefits, employers are taking notice. Yet, HR leaders don’t feel confident they can meet employees’ needs: Many companies are even facing the difficult choice to scale back, with one in four HR leaders sharing that they are trimming employee financial benefits to prepare for a possible recession—suggesting a growing disconnect between employee needs and what HR leaders can realistically provide during turbulent times.

Against this backdrop, this year’s study provides key insights into evolving HR leader and employee views of their workplace benefits and how both groups are navigating financial tensions.

Financial Benefits Under the Microscope

Nearly 69% of employees say they are more carefully reviewing their financial benefits (up 9% since 2022)—suggesting a need for more comprehensive offerings. And while HR leaders agree there’s an opportunity for their companies to respond, economic uncertainties are forcing many to make hard choices. Find out how rising to the challenge or retreating to the sidelines may influence employee retention.

• 88% of HR leaders say employees have requested benefits their company doesn’t offer

Equity Compensation–A Powerful Engagement Tool

The perception of equity compensation as a benefit has evolved in recent years, as it’s now considered to be a primary driver to meeting long-term goals. For the first time since the study began, participants cited “meeting long-term investment goals” as the top use of equity compensation. HR leaders and employees are aligned in saying that having a benefits plan that includes stock ownership is the most effective way to stay engaged and motivated.

• 97% of HR leaders and 84% of employees agree that including equity compensation and stock ownership is the most effective way to motivate employees and keep them engaged

Ongoing Considerations: Financial Stress and Productivity

HR leaders increasingly worry that employee stress will negatively affect performance at work. Employees echo this concern, agreeing that outside stressors impede their work, and call attention to the growing need for financial wellness benefits—especially retirement planning guidance and access to a Financial Advisor.

• Nearly 9 in 10 HR leaders offer employees financial wellness programs to counterbalance personal finance stressors

Younger Generations Are Cutting Back on Savings and Retirement

For the first time in history, the workforce includes five generations of workers. Providing a retirement solution that can address the needs of diverse age groups and backgrounds isn’t just a good idea—it’s a strategic business decision. But this challenge remains complex, especially with today’s financial pressures. Some employee groups are struggling more than others. While more participants across the board seem to be reducing contributions to their savings and retirement accounts compared to last year, this is especially pronounced among the younger cohorts, with Generation Z (78%) and millennials (80%) scaling back at almost double the rate of their Generation X (58%) and baby boomer (40%) counterparts.

• 66% of employees reduced contributions to savings accounts due to inflation and/or concerns of a recession

Additional Information From Morgan Stanley

Additional details are available in Morgan Stanley at Work’s State of the Workplace Study here. As part of a series of findings from Morgan Stanley at Work’s third annual study, the business published its findings on financial benefits. It will also publish its findings on financial wellness and retirement in the coming weeks.

Methodology

The data from the Morgan Stanley at Work Employees Survey and HR Leaders Survey comes from a survey of 1,000 U.S.-employed adults and 600 HR leaders for companies. The survey was conducted on behalf of Morgan at Stanley at Work using an email invitation and an online survey between March 16th and March 22nd, 2023, by Wakefield Research (www.wakefieldresearch.com).

About Morgan Stanley at Work

Morgan Stanley at Work offers a suite of financial solutions, which spans Equity Compensation through Shareworks and E*TRADE Equity Edge Online, Retirement and Financial Wellness Solutions. Morgan Stanley at Work combines cutting-edge planning and Morgan Stanley intellectual capital and financial education delivered through multiple channels to enable employees to build a holistic plan to achieve their financial goals. Securities products and services are offered by E*TRADE Securities LLC, Member SIPC. In connection with stock plan solutions offered by Morgan Stanley at Work, E*TRADE Securities LLC and Morgan Stanley Smith Barney LLC provide brokerage services to stock plan participants. E*TRADE Financial Corporate Services, Inc. and E*TRADE Securities LLC are separate but affiliated subsidiaries of Morgan Stanley.

About Morgan Stanley Wealth Management

Morgan Stanley Wealth Management is a leading financial services firm that provides access to a wide range of products and services to individuals, businesses, and institutions, including brokerage and investment advisory services, financial and wealth planning, cash management and lending products and services, annuities and insurance, retirement, and trust services.

About Morgan Stanley

Morgan Stanley (NYSE: MS) is a leading global financial services firm providing a wide range of investment banking, securities, wealth management and investment management services. With offices in 42 countries, the Firm’s employees serve clients worldwide including corporations, governments, institutions and individuals. For further information about Morgan Stanley, please visit https://www.morganstanley.com/.