In this interview with Irina Makukh, Employee Equity and Executive Remuneration Lead at Origin Energy, we hear how Origin’s focus on flexibility and communication is driving the growth and success of their Employee Share Plan. Origin Energy is one of Australia’s leading energy companies with a focus on energy retailing, power generation including a growing portfolio of renewable energy and storage projects, and gas production. A leading provider of energy to homes and businesses around Australia, Origin employs around 5,000 people in Australia as well as PNG and South Pacific.
Information provided in this interview is of a general nature and is not financial or taxation advice and does not take into account the personal objectives, financial situation and needs of individual employees. Origin always recommends employees consider obtaining their own financial product and taxation advice from people who are licensed to give that advice.
Hi Irina! Thank you so much for joining us to chat about your work at Origin Energy managing the Origin Employee Share Plan. Can you tell us a little bit about your role at Origin Energy?
Hi Max and thank you for the opportunity to share some details about Origin’s Employee Share Plan.
Over the past few years, my role has primarily focused on ensuring efficient operation of the Equity Incentives and Employee Share plans, which deliver great benefits to our employees. Origin is a large and diverse company operating in the dynamic energy landscape, and so each year presents its challenges and opportunities in offering employee rewards and benefits, which makes it an interesting and rewarding place to work.
Overall, the ESP program has been very successful, with around 4,600 employees choosing to participate in the Employee Share Plan every year
What kind of share plans does Origin offer?
Eligible Origin employees have an opportunity to participate in the Employee Share Plan (ESP), with a choice of participating in either the General Employee Share Plan (GESP) or the Matching Share Plan (MSP).
GESP participants are allocated $1,000 worth of Origin shares at no cost; whereas those who participate in the MSP have an opportunity to purchase shares via a salary sacrifice arrangement with Origin matching the purchase on a one-for-two basis. All allotted shares are subject to certain trading restrictions, which is a tax requirement of such schemes.
While the GESP, which is a taxed-upfront concession scheme, has been a part of the employee offering for more than 20 years, the MSP, which is a tax-deferred scheme, was introduced in 2018 to provide employees with flexible options of building their Origin shareholding. Under the MSP participants are able to choose from five different levels of salary sacrifice ranging from $1,200 to $4,800 per annum. This innovative arrangement offers an opportunity for employees at all levels of the organization to access a program suitable to their circumstances.
Overall, the ESP program has been very successful, with around 4,600 employees choosing to participate in the Employee Share Plan every year – of this ~17% opt in to the MSP program.
What was the reasoning behind creating a share plan that has 5 different levels of salary sacrifice?
Recognising that every employee is different, with their own unique circumstances, our aim was to design a share plan that would be attractive to as many employees as possible by offering them more flexibility in how they participate. We provide a few clearly defined options for the annual salary sacrifice amount where the participants are able to choose a suitable arrangement level and have a clear understanding of the amount expected to be deducted in each pay cycle.
As the MSP operates on an annual basis, the participants are invited to elect their salary sacrifice amount each year, with most of them (~78% of all participants) opting in for the highest amount available under the scheme.
Recognising that every employee is different, with their own unique circumstances, our aim was to design a share plan that would be attractive to as many employees as possible by offering them more flexibility in how they participate.
You also mentioned that the current MSP participation rate is 17%. How has this figure changed since you introduced the plan in 2018?
The MSP participation has grown each year and has increased from 10% to 17% (representing 19%pa CAGR) since its launch in 2018, which is a strong indication that the program has been attractive to our employees.
It is fantastic to hear that there has been a year on year increase in MSP participation rate, especially given the difficult operating environment over the last 2 years. Do you think that the flexibility and accessibility of the plan has contributed to the ongoing rise in the participation level?
We believe the enhancements introduced in 2018 transformed our ESP program, making it a very flexible and accessible scheme for employees at all levels of Origin.
To give an example, if we look closely at the data on program participation, on average 20% of all participants cannot take advantage of the tax concession offered by the GESP scheme (the $1,000 scheme), therefore the fact that the MSP program attracted 17% of the participants is a very positive indicator of its effectiveness.
What are some of the main challenges or barriers that impede a greater uptake of the Origin Share Plan amongst employees? In other words, what’s stopping the rest of the employees from participating in the MSP?
As you mentioned, it has been a difficult operating environment over the last two years, with the overall uncertainty a challenge for many of us and this has likely contributed to the level of participation of employees in the MSP, particularly noting the MSP component of the enhanced ESP program was still very new when the pandemic started.
It is hard to tell if the program participation would have been growing at a higher rate if we didn’t have those global challenges, however we are quite excited that every year more and more employees consider participating in Origin’s MSP program.
What other strategies have you employed to increase participation amongst employees?
This is a great question, and one we are always thinking about as we look to attract more employees into the program. As we are establishing a new normal in our hybrid ways of working, we will be focusing a lot of our efforts on communication strategies to ensure we are reaching as many people as possible. Origin has a diverse workforce so it will be very important to ensure our communication is effective in promoting the options available in the program and the broader benefits of employee share ownership.
When designing a share plan, the key starting point should be understanding your employees and their needs, which in turn informs the formulation of clear objectives of the plan.
What are the key takeaways from the success of this years’ offer and the high level of participation in the Origin Share Plan more generally?
When designing a share plan, the key starting point should be understanding your employees and their needs, which in turn informs the formulation of clear objectives of the plan. In our case, the objective was to design a share plan that would give our employees greater choice and flexibility in how they participate. I’m really pleased we have been able to deliver on that objective.
Thank you Irina!
Thank you Max, I appreciate the opportunity to talk about the Employee Share Plans Origin offers to our employees.
