What is Equity Plan Administration?

Content Team August 16, 2023 mins read

About the team

Global Shares’ Content Team comprises a dynamic and talented team of writers and experienced professionals who strive to deliver useful equity insights and simplify complex equity information, all with the aim of helping you to better understand equity management.

What is Equity Plan Administration?

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

Equity compensation/Stock compensation can be stock options (ISOs and NSOs), restricted stock (RSA and RSUs), employee stock purchase plans (ESPPs) and so on.

To have them implemented, one of the big components is stock plan administration.

What is stock plan administration?

Stock plan administration is the process of creating, tracking and managing equity awards and employee plans for employees in a company. It involves input from multiple internal and external parties.

  • Examples of employee equity awards: Approved/Unapproved Options, Executive Stock Options, ISOs, CSARs, SSARs, RSUs, RSAs, PSUs, NQSOs, including Performance & 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, LTIP’s, JSOP’s and a wide range of custom types.

Once you have your stock plan or equity plan designed and approved, the administration process can kick off. Your stock plan administrators will 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 experts to tell you what the requirements are from region to region.

Who is responsible for stock plan administration?

It depends on the number of participating employees and the size and/or scope of your company.

For instance, the existing Finance or HR department will take up the task if the program scale is relatively small. But when a company grows, this responsibility will likely need a separate stock plan administration department in which the stock professionals understand the extensive accounting, tax, legal, and securities regulations governing equity forms like stock options and other broad-based plans.

In large private companies, pre-public companies, and public companies, it’s usual to see this function is outsourced. By bringing in a professional partner like Global Shares, you can focus on your core business while leveraging specialized expertise to ensure best-in-class equity programs.

Let’s break stock/equity compensation administration down

Based on the definition above, stock/equity compensation administration is a complex process. Here, we break it down into 7 components for you and your team to consider:

  1. Gather all the necessary employee data to figure each eligibility, tax liability and so on
  2. Create equity plans for individuals with rules, e.g. vesting rules, max. contributions (many companies usually don’t just offer one type of award)
  3. Track activities, e.g. enrolment, grant acceptance, vesting, exercise, historical issuances and a lot more
  4. Deal with multi-office locations when it comes to tax and compliance issues
  5. Handle reports from transactions, contributions, taxes, payroll and so on
  6. Communicate with participants, internal and external parties
  7. Stay legally compliant with federal, state and foreign regulations along with securities laws.

At Global Shares, our Global Compliance advisory team is made up of in-house lawyers, tax experts and fully accredited stock plan professionals who work together to ensure your business complies – globally. Speak with us today to learn more about how we can help you with your stock plan administration.

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

Ways to manage equity plan administration

Since there’re many administrative tasks and advanced knowledge involved, companies usually have a team of stock plan administrators to manage various stock plans for their organization. They can either:

  • Create a spreadsheet and set up formulas from scratch; or
  • Find a stock plan provider and use their stock plan services

Pros & cons of 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 your company as your 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 intensive understanding of tax/compliance in each jurisdiction

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

Pros & cons of using an equity plan administration provider

Another way to administer your plan is to leverage an experienced and professional equity plan administration provider.

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

To learn more about other benefits of equity plan administration software, read here.

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 you some time and effort by starting it right?

At Global Shares, we have over 15 years’ 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 ownership.

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.

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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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