Setting your equity compensation reporting up for success in 2025

As companies get their 4th quarter lookback underway it’s an ideal time to inspect your equity compensation plans, identify any issues, make required changes and set your reporting up for success for the year ahead.

Our recently published Trends in Equity Compensation report showed 29% of companies cited handling reports as a major pain point. For any equity compensation plan to succeed it’s essential to assess the effectiveness of it and make necessary adjustments as required. Spending time preparing now can help ensure a smooth transition into the New Year and help you avoid common pitfalls.

Data:

A common question will be how successful has your plan been? But how can you determine this? It’s simple, look at the data and the hard facts.

What goals did you set at the start of the year and have they been achieved?

Has attrition stabilized or slowed down? Have HR reported that they’ve been able to recruit better?

If the data reveals shortcomings, consider what changes are needed to enhance effectiveness next year. Don’t simply repeat the same things and expect a different result.

Trends:

Staying abreast of industry trends is crucial.

Post-great resignation do you need to give more to prospects to recruit them or has the needle swung in favour of management and can you now economize?

How is your vesting looking?

Did you have to switch to 3-year vesting in the past and are you now in a position to go back to a 4-year vesting period?

What are the trends for vesting periods in your industry?

Staying informed about what your peers and competitors are doing to remain competitive is crucial. To find out more about what’s happening across the equity compensation landscape download a copy of our Trends in Equity Compensation report.

Regulations:

Have you kept abreast of SEC, IRS or other local regulatory changes as they apply to you?

In the settlement process T+2 has gone to T+1 in the US. Do you understand what this means for you and is your equity compensation correctly aligned with this?

Have you looked ahead at what other changes are coming down the tracks and considered what you might need to do to prepare for them in order to remain compliant and avoid potential issues?

Our survey showed that as companies grow and expand they are more likely to offer an all-employee equity compensation plan in multiple countries and are more likely to outsource some or all of their plan management. 63% of public companies chose this approach to share plan management according to our Trends in Equity Compensation report.

Tax:

Tax considerations, especially for expatriates and remote workers, are increasingly complex. Another common pitfall is tax shortfalls due to individual taxpayers not being aware of requirements.

Have all your stakeholders given you the right information? Is it fully up to date?

If you are using plan software are you doing so correctly? Do you have API continuity and payroll feeds?

It’s crucial that all stakeholders have provided accurate information, this is especially important when it comes to remote workers to ensure they are being taxed correctly. Regularly verifying this can help to prevent potential penalties

Global plans:

Operating a global plan comes with many new challenges. The findings in our Trends in Equity Compensation report revealed 51% of respondents find dealing with global employees is an administration pain point, 40% cited both tracking activities and staying compliant, while 29% had difficultly with handling reports. Many respondents replied that they experienced multiple pain points.

Interestingly 13% of public companies and 6% of private companies reported having no pain points as their plan administration is outsourced to a third party.

Employee issues:

It’s safe to say that employees don’t think about equity compensation tax and compliance on a daily basis so when actions are required they can find them complex or confusing, e.g.:

– Lack of awareness of what’s required of them.
– Belief that tax is being handled by payroll.
– Residence not being declared correctly.
– Difficulty in getting info from the employer.
– Trying to reclaim tax refunds they’re not entitled to or eligible for.
– Not knowing they’re in a plan or where, there are multiple plans, not knowing which one it is.

Efficiency and technology:

Is the plan working correctly? Have you run into any technical difficulties?

Are you getting repetitive questions from participants about the same issues?

What communications channels are you utilising to contact participants?

Issues like these can cause headaches and turn what is meant to be a reward or cause for celebration for employees into something that’s seen as a hassle or a chore. Having a clear educational and communications support in place can help to alleviate these issues.

Be prepared:

Audits happen for a reason and it’s worth noting that if they discover the basics are wrong then they will likely wonder what else is wrong. This can potentially result in costs, disruption, downtime, queries, engaging with an advisor, reputational damage, fines, etc.

Familiarize yourself with deadlines and consider outsourcing some administrative tasks to alleviate pressure on your team. Consider things you can control and prevent against like late filing of returns, data issues and data quality. Your controls and risks should be documented with a methodology in place. It can help to leverage technology to assist with this as manual solutions can often lead to human error.

What next?

By taking proactive steps now, you can help set your equity compensation reporting up for success in the year ahead. To get more insights you can download our full Trends in Equity Compensation report here or arrange to speak to one of our equity compensation professionals.