SOUTHFIELD — Everyone has heard of golden parachutes and golden handcuffs: financial incentives to keep valuable executives and technicians from being wooed away by competitors.
Well, Verizon Wireless says that it now uses what you might call golden shoelaces to keep its 1,200 Michigan employees (not to mention 36,000 other workers nationally) from succumbing to the wiles of the competition.
Actually, when the company instituted its so-called VARs program last year, remaining competitive in the highly competitive technology hiring market was only part of the program’s inspiration.
But first, VAR stands for Value Appreciation Right.
According to Michelle Gilbert, an associate director of public relations for Verizon, the firm offers a VAR to each full-time employee and all part-time workers who average more than 20 hours a week.
A VAR is a grant reminiscent of a stock option in that it is tied to the fair market value of the company and is a way for an employee to share in the growth of the firm’s value. The firm updates VARs annually to reflect any increases in the company’s value.
Verizon Wireless awards VAR grants, which vest fully in three years, based on each employee’s job category and base pay.
“One of the reasons Verizon did this was to keep employees who might be hired away by other companies,” Gilbert said.
“But even though job prospects are dim this year compared to last,” she said, “the company is still offering VAR for even more important reasons.”
- First, retaining a seasoned employee on a long-term basis constitutes a huge savings for Verizon. According to a Southwest Michigan survey by the American Society of Employers, the cost of recruiting and training a technical employee runs more than $9,000.
The company not only is spared the expense of training a new worker, but also the costly time any new worker needs, once trained, to ramp up to full productivity.
- Second, when a worker knows he or she has a permanent stake in the company’s future, the “us vs. them” in employee relations tends to diminish and the “we-feeling” grows, making for more genial working conditions.
- Third, offering the VARs program to part-timers has much the same impact.
“For one reason or another some people prefer not to or cannot work full time,” Gilbert said.
But she said that doesn’t make them any less valuable to Verizon. She said the same sense of ownership and participation is extremely important — especially if the part-timers in question work in the retail and customer service areas, which form the primary interface between the company and its customers.
VARs become fully vested in three years and can be exercised up to 10 years from the date they are granted. Gilbert said VARs are part of Verizon Wireless’s long-term incentive program for employees.
The company also has enhanced its 401(k) plan by allowing employees to participate immediately upon hire, and by matching 100 percent of employee contributions up to 6 percent of salary, and expanding the investment options.
Company matching dollars become vested after each employee’s third year of service.
Beyond that, employees will also be eligible for profit sharing and bonuses based on the company’s performance.
Verizon Wireless says that it is the largest wireless communications provider in the United States, with more than 26.3 million wireless voice and data customers and nearly 3.5 million paging customers.
The firm is owned jointly by Verizon Communications and the Vodafone Group.