A stock option is the most popular form of equity companies offer to their employees as part of their compensation packages. To manage employee stock options can be simple if you bring in the right partner.
With over 15 years of experience, Global Shares deals with equity plans for large and small, private and public companies whose locations and employees are spread across the globe – this means we deal with every type of stock option grant imaginable and global tax/regulatory/compliance implications.
Today, we’ll show you how to leverage our employee stock option software to simplify the administration during:
- Granting stock options
- Tax calculation
Granting stock option awards
This huge range of stock option grants through our stock option module means clients can display to participants and receive reporting on their stock option grant data the way they want it.
Track every type of stock option and administer them the way you want.
USA Option Grant Types:
- NQO – Non-Qualified Stock Option
- ISO – Incentive Stock Option
- PNQO – Performance Non-Qualified Option
- PISO – Performance Incentive Stock Option
UK Option Grant Types:
- EMI – Enterprise Management Incentive
- CSO – Company Share Option
- UKASO – UK Approved Share Option
- UKUSO – UK Unapproved Share Option
Rest of World Option Grant Types:
- OTCO – Over the Counter Option
- PO – Premium Option
- ESO – Employee Stock Option
- CGO – Capital Gains Option
Setting vesting schedule & weighting
Stock option vesting is the process of gaining 100% ownership of an option. When employees are granted stock options on day one, they don’t have full control over it until the vesting period has passed. Then, it can be released to the participants.
In our system, you can define the vesting schedule for your stock option grant. Whether it’s a simple 3-year 100% cliff vest or a more complex 48-month 2.08% vest with associated rounding, you can set it up for your stock option. You can also define vesting weighting – the amount of the award to vest each year. (Note: vesting schedules can also be set up as performance-based for performance stock.)
Once stock option vesting has been set up, then the automated vesting service will kick-off. It means that the vesting schedule associated with the option grant is updated continuously to ensure a correct live balance at all times.
Reports are also directly tied into this vesting service so that stock option reports are always reporting the correct vested and unvested balances.
Participants will also see the same on their employee portal (i.e. Equity Gateway – a multi-lingual and multi-currency user interface allowing participants to have 24/7 online access to their awards) where they know the number of vested and unvested shares, as well as intuitive statements showing future vesting coming their way with associated monetary values of those vesting stock option grants.
Setting exercise methods for stock options
An exercise of stock options occurs when a participant takes up their right to buy the vested shares at pre-set exercise price (or called strike price) after the vesting period. At the time of exercise, there’re some costs participants need to pay:
- Exercise price (strike price)
- Fees and commissions: e.g. Broker fees and wire fees
As an industry-leading stock option management provider, Global Shares intuitive ‘Exercise Wizards’ have never been easier. With the ‘Exercise Wizards’, we work with you together to define exercise windows (the period when participants can exercise their awards through the employee portal) and blackout periods (the period when the company’s employees are prohibited from trading its securities).
At the same time, participants are clear on what’s available for them to exercise when they log in to their accounts. They are guided through the process with our online “Exercise Wizard” when they decide to exercise. Our stock option management software facilitates the following exercise methods (the way participants can use to complete exercise transactions) for all stock option grants:
1. Monetary payment (Hold all)
The participant uses their personal funds to cover the associated costs (exercise, fees and applicable taxes). He/she would pay the costs either by check, wire transfer or payroll and would then receive the shares of company stock.
2. Sell to Cover (STC)
The goal here is to cover the costs associated with exercise, fees and applicable taxes by selling shares equal to the costs. The remaining stock balance will then be issued to the employee.
So, participants aren’t required to pay for the shares upfront like in the first idea.
3. Exercise & Sell All
The goal here is to generate an immediate cash balance.
Like idea 2, There is no requirement to make an upfront payment as the associated costs (exercise, tax, fees etc) are paid with the proceeds of the sale of shares. The net proceeds in cash are then distributed to the employee.
4. Withhold to Cover Exercise
Typically used by private companies this exercise method is similar to sell to cover except that your company keeps the number of shares equal to the associated costs prior to award issuance.
Automating tax calculation
Math is not everyone’s strong suit so we’re here to simplify it.
Admin’s and Participanits’ Side:
Everyone knows how important it is to accurately file your income tax return. Our employee stock option software automatically calculates accurate transaction taxes for your participants.
The system can apply taxes by setting up tax rates and codes assigned to participants or participant groupings.
If provided with applicable income and tax payment information by you, we can feed the system what is needed to automatically calculate accurate transaction taxes.
Getting support for stock option administration
You’ll be assigned a dedicated client manager (CM) at a corporate level and a dedicated team of share plan analysts.
Your CM will provide you with an assurance of a smooth transition from our tendering for the project, to the implementation of your plans on our system, right through to a cooperative, working relationship.
Your share plan analyst team will undertake all the necessary administration and record-keeping tasks associated with the operation of your share plans in accordance with the relevant tax legislation and regulatory body requirements. Some of the high-level services are:
- Regular liaison and support for payroll
- Management of joiners, new hires, leavers, and cancellations
- Exercise of options
- Management and administration of all payments to participants, following the sale of shares
- Collection of income tax and any other relevant taxes or social insurances
- Assistance with tax and regulatory filings as required
Ensuring your participants understand and appreciate what they are receiving when they are granted stock options is paramount to what Global Shares does.
To achieve this, we offer 24/5 human support in their local language and provide an extensive range of resources:
- Educational videos explaining what a stock option is
- Glossaries providing concise explanations on stock option grants
- Interactive stock option calculators which allow the participant to model their stock option grants
- Others: FAQ, user guides, tax guides etc
What are Modelling Calculators:
Modelling calculators are available in the employee portal to give participants an insight into their potential gains if they want to sell their awards. It let them test out a sale without commitment.
The calculator provides estimates of taxes, exercise costs and net proceeds, ensuring that when you’re ready to sell, you can make the right decision on how and when they trade.
Summary of our employee stock option software
To wrap up, here is a summary of our services that can help you with employee stock option administration.
- Technology and Experts: We do the heavy lifting work for you – setting up your plan and offering you administrative efficiencies
- Ease of Administration without a steep learning curve
- Customized Reporting: You can access all the reporting information e.g. financial and business intelligence (BI) reports in different formats
- Excellent support: Your dedicated client manager and a team of stock plan analysts ensure smooth transition and operation
- Data security supported by a team of in-house cyber security and IT professionals
- Compliance: You’re assured of the highest level of compliance to maintain data integrity and accuracy.
- An Engaging Employee Portal: It enables your employees to have control over their stock option awards.
- A multi-lingual, multi-currency & multi-security user interface that allows participants to access all their equity and share plan information 24/7, e.g. award balances, historical transactions, future vesting coming their way
- Self-help platform enabling participants to accept/decline, exercise and sell a stock option grant online
- Ease of trading, with total integration to our broker module
- Service helpdesk for participants: 24/5 multi-lingual support
- Extensive resources: FAQs, videos, how-to guides, modelling calculators
- A high level of customization with tailored-to-match fonts, colours, layout and more
- Flexible vesting settings allow any type of vesting schedule and vesting weighting
- Correct data for admin and participants: The number of vested and unvested stock option awards is correctly updated automatically
- Intuitive statements are available for participants showing when their future vesting is and the associated monetary values
- Vesting schedules can be saved and re-used. So, when you need to grant stock options with the same schedule in the future, you can re-use the existing ones to save you time.
- Multiple methods for exercising stock options for participants to choose from
- Flexible settings with ‘’Exercise Wizards’’, e.g. set up exercise window and blackout period, and disable unsuitable exercise payment methods.
- Automation: Once awards vest, shares are released to participants via an automated release transaction.
- Transparency: Details of transactions will be available for the participant to view. An exercise request will also be created within the admin page.
- Automatically calculate accurate transaction taxes
- Modelling calculators giving insights into participants’ estimates of taxes and net proceeds
Global Shares provide employee stock option management software and support services for companies all over the world to alleviate all past administrative complexities thanks to our accessible, simplified, user-friendly software.
Transform your stock option plan administration software with our industry-leading technology. Our experts would be delighted to discuss your stock plan requirements.
Have questions about our stock option software and services? Request a free demo to find out more about how we can help you take your equity compensation plans to the next level.