Stock Options Administration

Employee stock options are a form of equity compensation that provide employees the opportunity to purchase stock in their company at a pre-set price on an agreed future date. They are a common choice for employers looking to recruit, reward and retain talent, as well as build financial wealth for employees.

What does stock option administration involve?

Employee stock option administration is the process of implementing, granting, tracking and managing stock options in a company for employees.

Gabbi Stopp, FGE, FCG, Executive Director at Global Equity Organization, GEO explains,

It’s also important to be aware that administration often doesn’t just fall on one team or area. Gabbi Stopp says "not only are Legal, Finance and HR teams required to input in this process, but also multiple third-party providers, for example, 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. Stock plan admin teams need therefore to be adept at working cross-functionally and with multiple external vendors and advisors. It’s crucial to work with carefully selected vendors who have an intuitive understanding of requirements and who can commit the necessary resource and support in order to obtain optimal outcomes for plan participants."

Breaking administration down

Stock option administration is a multifaceted and often complex process. Here we break it down into nine major components for you and your team to consider:

• Gather all the necessary employee data: This encompasses all the details required of eligible employees for the option grants, such as address, work location, business unit, salary, level and title. This information will impact areas such as withholding taxes, share allocation and others. Employees will need to notify the company of any changes to this information. Note: When collecting data, it’s important to be aware of any applicable data protection rules.
• Be aware of plan details and rules: There are many details and rules needed to be handled carefully, including plan type (e.g. ISOs and NSOs), plan duration, vesting (whether time or milestone-based), expiry date, termination rules, exercise methods, exercise window (if applicable), etc.
• Track activities: This can include grant acceptances, vesting schedule, exercise process, sales, termination, post-termination exercise window and a lot more.
• Coordinate sales and transfer requests: You may be required to work with brokers to execute sales transactions or transfers submitted by employees.
• Taxation and accounting rules: Calculating and withholding taxes, issuing and filing tax forms, recording and reporting equity compensation costs, updating valuations of equity, staying compliant with local and international tax/accounting laws, etc.
• Dealing with multiple office locations Options can be launched in multiple countries meaning they might be suitable for a company with a global reach. Should you choose to offer a plan in multiple regions you will need to regularly review and monitor federal, state and foreign regulations along with any securities laws for each jurisdiction you offer the plan in. Note: Some companies may choose to offer country-specific option plans which can be more tax-favourable to their foreign employees, rather than going with a single global plan.
• Reporting: Tracking and reporting on exercise, taxes, payroll, employee demographics, etc.
• Communication and education: Having a clear communication and awareness plan to help promote the plan among employees and ensure they have access to all relevant information will often have a major impact on the success or otherwise of your plan.
• Mobile workforce: Communicating with employees about the intricacies of compliance can get even more complicated when they move across locations. As an administrator you will need to know the impacts on your plan if participants move from region to region, including the potential impacts on tax, e.g. losing the benefits of a tax-favourable ISO plan.

How to administer your employee stock options?

There are generally two approaches to managing an employee stock option plan – Manual and Automated.

While a manual method with a spreadsheet might seem like a suitable approach when you’re starting out, it can potentially lead to complications as the plan grows and the number of participants increases.

An automated, or software solution, can often be a more scalable method and may help to mitigate the risks associated with manual processes, such as the danger of human errors or having multiple versions of the same document circulating among internal colleagues.

10 ways our stock option administration solutions could benefit you

Our cloud-based stock option administration solution combines digital plan administration, day-to-day transaction processing and participant management.

Here are some of the benefits we can offer corporate admins:

• Smart and ever-evolving technology along with a team of experienced professionals
• Excellent support: Include a dedicated client manager, stock plan analyst team and client service desk etc
• Quick onboarding: Whether you’re starting or switching, we set up your plan seamlessly and efficiently. On average, our onboarding process is completed in eight weeks or less.
• Ease of administration: Using an automated system allows for intuitive and simple administration without a steep learning curve.
• Automation of key administrative tasks: Your employee stock options are readily excisable once the vest date arrives, meaning you won’t need to manually track the vesting schedules.
• Stock options for employees globally: We can help you design and operate a plan for participants in numerous countries, using one seamless system.
• Customized reporting: Generate financial and business intelligence reports, tables, charts, data maps etc, all at the click of a button.
• Enhanced security: Supported by a team of in-house cyber security and IT professionals.
• Updated functions and features: Our IT team are constantly on the look-out to make improvements to our offering based on user feedback and technological developments.
• Software integration: Connect and extend your equity management workflows with a range of API integrations.

Additionally, our solution helps empower your employees with a fully personalized, online participant portal. This engaging, secure, easy-to-navigate portal allows them to view, track and trade their stock options themselves – further reducing your admin workload.

Our solutions could benefit your employees too

Giving employees 24/7, online access to their stock options can be critical to helping them engage with their plan and understand how it works.

• Engaging and intuitive participant portal: 24/7 real-time online access to allow employees to accept, track, exercise, sell and transfer their stock option grants.
• Equity life cycle at a glance: Allows employees to see where the value of their stock options along with details of – how many shares are vested, remain to be vested, have exercised etc.
• Mobile app: Gives your on-the-go participants the ability to access and trade their equity anytime, from anywhere, at the touch of a button.
• Easy, secure trading: Employees can receive funds into their bank accounts automatically when their trades are settled.
• Multi-lingual & multi-currency interface: Optimizes your employees’ experience.
• Participant help desk: Support available to help reduce your stock plan administrative workload.
• Self-learning library: Videos, FAQs, Tax guides, Calculators for modeling purchases and more. Their statements, contract notes and related documents can also be found in their personalized portal.

Contact us

We help companies of all sizes harness the potential of equity compensation to attract, retain and reward key talent. From software implementation and administration to compliance and reporting – we can work with your company and employees to help reap the benefits of employee equity compensation plan.

We would be delighted to discuss or demo our Stock Options Software with you in more detail.