What are Employee Equity Plans?
Under an SAYE Scheme:
An employee agrees to save a fixed amount out of net pay for a predetermined period i.e. three, five or seven years and
At the same time the company will grant the employee options based on the amount the participant has agreed to save. The savings must be held under a qualified savings contract.
At the end of the savings period, the participant has the choice to:
Use the proceeds of the savings contract to buy some or all of the shares covered by the option
Take the proceeds as a lump sum.
The aim of an SAYE scheme is to help the participant to exercise options without having to borrow. This tends to result in more employees holding on to their shares rather than selling them immediately.
SHARE OPTION SCHEMES
Basically, an unapproved share option scheme gets its name due to the fact that there is no scheme documentation needed to be approved by the Revenue.
A share option is a right but not an obligation, to purchase shares at some future date at a price which is determined on the date the option is granted. If the market value of the shares is greater than the option price when the options can be exercised the options are in the money. However, if the market value is less than the option price when the options can be exercised the options are underwater. Assuming growth in the share price, the option holder has an opportunity to buy shares at a price less than market value.
An APSS allows employees to participate financially & tax efficiently in the growth of their employing company. Company profit sharing schemes are operated as an effective recruitment and employee retention measure. The employing company obtains tax relief for the funds given to the trustees to acquire shares and the cost of establishing the scheme. It is a proven method of rewarding & motivating an existing workforce and a cost effective alternative to giving cash bonuses or pay rises. There is a 10.75% tax saving of PRSI for the employer where remuneration is by way of equity participation rather than cash or other benefits.
EMPLOYEE SHARE PURCHASE PLANS (ESPPs)
Many companies, particularly subsidiaries or branches of US corporations, also operate Employee Share Purchase Plans.
An ESPP is a way for you to purchase shares in your company through payroll deductions, sometimes at a discounted price. Once you have enrolled in the plan, your company will collect your payroll contributions to purchase shares on a specific date.
The discount allowed is normally 15% of the market value of the shares on either the first or last day of the offer period, whichever is the lower. The offer period is normally six months.
Different types of plans have varying degrees of complexity when it comes to the administration and reporting of each plan. However, regardless of the type of plan, it can still be very complicated, expensive, and time-consuming to think about setting up and maintaining an in-house share plan management team.
This is why organizations look to external share plan administrators, such as Global Shares, to either outsource the administration of the plan or use their share administration solutions.
Click on the ‘+’ drop-downs below to read more about what equity compensation services Global Shares can provide to help you simplify the venture.
What Share Plan Services do we provide?
Fully or partially outsourcing your share incentive plan or share option administration removes all of the complexity associated with share plan administration as you offload these complexities to an experienced administrator. Although this is by far the easiest option, it can also be the most expensive.
Global Shares offers organizations the option to fully or partially outsource their share scheme administration. We have over 10 years’ experience in managing and administering employee share option schemes, including employee stock purchase plans. We have encountered all of the difficulties that arise when administering equity plans and have refined our operational processes through the years to provide the most efficient, cost-effective service possible.
It is also very possible to administer an equity plan from a department within your organisation using specifically designed share administration software. If at all possible, try and find a service provider that includes implementation, client training and a designated ongoing operations team within their service offering.
Global Shares’ administration software platform is EquityAdmin. This software is extensive in its functionality, covering everything from day-to-day administration to using BI Reporting to create intuitive, visual reports, eliminating the need for large, convoluted reports and excel spreadsheets.
- EMPLOYEE EXPERIENCE
Complete share plan solutions should include an intuitive employee-facing platform, where they can buy and sell shares, exercise options (depending on the plan type), view equity statements, and have all the resources necessary in one place.
As well as all of these essential elements, Global Shares offers EquityGateway, which allows organizations to personalize their participant portal with their own imagery, wording, and branding. This provides the employee with a familiar environment to comfortably interact with their share plan, ensuring that they get the most out of it.