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Equity Plan Administration – Scope, Methods, Pros & Cons


Equity compensation is effective in both public and private corporations, large and small, to boost employee engagement. So, companies like to use different forms of equity to allow their employees to partake in ownership of the firm to achieve enhanced productivity and many other benefits.

Despite offering multiple benefits, equity compensation comes with challenges – one of them is administration. In this article, we’ll discuss:

What does a job in equity plan administration involve?

Equity plan administration, commonly known as share plan or stock plan administration, is the process of creating, tracking and managing employee equity and employee plans in a company. It involves input from internal and external parties.

  • Examples of employee equity awards: Approved/Unapproved Options, Executive Stock Options, ISOs, NSOs, Cash-settled SARs, Stock-settled SARs, RSUs, RSAs, Performance stock/units, Phantom shares, Cash-based, warrants and a wide range of other custom award types.
  • Examples of employee plan types: Approved and Unapproved purchase plans, ESPPs, LTIPs, JSOPs and a wide range of country-specific and custom types.

Once you have your equity plan (or stock plan/share plan) launched, the administration process kicks off. It’ll involve everything from tracking and reporting changes in ownership to updating documents/policies/procedures, communicating with stakeholders, consulting your board of directors, and staying compliant based on each region your employees are based in.

Not only are Legal, Finance and HR teams required to input in this process, but also multiple third-party providers – law firms for setting it up, brokers for the trading element and tax professionals to tell you what the requirements are from region to region.

So, a stock plan administrator is required to understand the extensive accounting, tax, legal, and securities regulations governing employee equity and other broad-based plans.

Which team is responsible for stock plan administration?

According to a 2020 survey, over 70% of the companies report that the primary responsibility for the administration of their stock plan is housed within their HR or compensation & benefits department. (Source: NASPP and Deloitte 2020 domestic stock plan administration survey)

Let’s break equity compensation administration down

Based on the definition above, equity compensation administration is a complex process. Here, we break it down into eight major components for you and your team to consider:

  1. Gather all the necessary employee data to figure out each eligibility, tax liability etc:
    If you’ve never launched a share plan, when you’re gathering data from your participants, it’s important to do it in accordance with the strict rules. If you need to switch providers, you need to be even more careful not to lose any data while protecting it during data migration.
  2. Create equity plans for individuals with rules:
    Companies may have multiple equity plans and awards. Make sure vesting and termination rules, exercise windows, expiration dates, contribution limitations and other rules are correctly implemented for each plan and each individual grouping.
  3. Track activities, e.g. enrollment, grant acceptance, vesting, exercise, historical issuances, termination and a lot more
  4. Deal with multi-office locations:
    A plan that works great for your Tokyo office might not work for the employees in your Italian branch. You may need to consider country-specific plans that may be tax efficient, as well as local cultures.
  5. Handle reports from transactions, contributions, taxes, payroll and so on
  6. Stay compliant in each jurisdiction:
    You and your teams should regularly review and monitor federal, state and foreign regulations along with securities laws from gathering data to designing a plan and administering it.
  7. Communicate with participants, internal and external parties
  8. Mobile workforce:
    Communication and compliance get even more complicated when employees move across locations, e.g. A mistimed move may put your employees in a situation where they have to pay more tax or they can’t get benefits of a tax-favorable plan.

To learn more about these considerations, head over to our equity compensation management guide.

Equity management solutions

Equity plan management can be performed in-house or outsourced:

  • Creating a spreadsheet and setting up formulas from scratch;
  • Onboarding an employee share plan provider and using their stock plan services

Solution 1: Using spreadsheets

When you’re starting out, it is possible to build a stock plan from scratch using a spreadsheet and manage the equity on it. We’ve heard some companies do this but it doesn’t scale with their company as their ownership plan grows.

Low setup cost
Causes human error easily
Easily accessible
Has scalability issues as you grow
Allows no/low automation
Lacks control, resulting in many versions
Requires an extensive understanding of tax/compliance in each jurisdiction

To read more about the dangers of managing stock plans with spreadsheets, click here.

Solution 2: Onboarding an employee share plan provider

90% of companies outsource at least a portion of plan administration

In large private companies, pre-public companies, and public companies, it’s usual to see this function outsourced. By bringing in a specialized stock plan provider like Global Shares, you can focus on your core business while leveraging their experience, knowledge and technologies to ensure high-quality equity programs.

Although you may have to pay to use their services, it could end up saving you time (and money) in the long run as their services and product are tailor-made for helping you with plan administration.

Always provides one single source of truth
Higher setup cost
Allows automation
Takes time to find the right provider
Provides a regulated trading platform
Allows participants to access/view/manage their equity
Easily generates different types of BI/financial reports
Offers human support
Helps you stay legally compliant in each jurisdiction
Secures your data
Saves you time and money in the long run
Provides extensive equity knowledge for each jurisdiction

By using the right stock plan administration approach, you can truly maximize your employee share plan. Download our free ebook to learn more.

Global Shares: your ideal equity plan administration provider

Although it’s possible to use a spreadsheet to administer your stock plan when you’re starting out, why not save yourself some time and effort by starting it right?

At Global Shares, we have over 15 years’ of experience helping companies of all sizes harness the potential of equity to attract, retain and reward key talent. From software and administration to compliance and reporting – we can help your employees take full advantage of employee equity compensation.

Request a free demo to find out more about our award-winning software. Transform your equity compensation administration with our industry-leading technology. Let us show you how with a quick demo of our software.

Please Note: This publication contains general information only and Global Shares is not, through this article, issuing any advice, be it legal, financial, tax-related, business-related, professional or other. The Global Shares Academy is not a substitute for professional advice and should not be used as such. Global Shares does not assume any liability for reliance on the information provided herein.

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