What is Share Plan Administration?

Share-based incentives have proven to be an effective means in both public and private corporations, large and small, to help boost employee retention, enhance motivation, engagement and productivity.

Setting up and running an employee share plan does come with challenges however – one of which is administration.

What does a job in share plan administration involve?

Share plan administration, commonly known as equity plan administration, is the process of creating, operating and managing employee share schemes in a company. It involves input from internal and external parties.

• Examples of employee equity awards: Approved/Unapproved Options, Executive Stock Options, ISOs, NSOs, Growth shares, Cash-settled SARs, Stock-settled SARs, RSUs, RSAs, Performance stock/units, Phantom shares, Cash-based, warrants and a wide range of other custom award types.
• Examples of employee plan types: Approved UK share schemes (e.g. SAYE, SIP, CSOP, EMI), ESPPs, LTIPs, JSOPs and a wide range of country-specific and custom types.

A share plan manager is typically required to understand the accounting, tax, legal, and securities regulations governing employee equity and other broad-based plans.

Which team is responsible for share plan administration?

According to a 2020 survey, over 70% of the companies report that the primary responsibility for the administration of their employee equity is housed within their HR or compensation & benefits department.

As mentioned already running employee share schemes requires a wide range of skills and knowledge, not all of which might be readily available within one department or even across your employee base. In a recent survey, we discovered that 63% of public companies choose to outsource all, or part of, their share plan management to a professional third party provider. 

Let’s break share plan management down

As you can see from the definition above, share plan administration is a complex process. Here, we break it down into ten major components:
1. Gather all the necessary employee data to help figure out each eligibility, tax liability etc:
If you’ve never launched a share plan, when you’re gathering data from your participants, it’s important to do it in an organised manner and in accordance with any data protection rules or guidelines. If are looking to switch equity plan providers, you will need to be careful that no data is lost during the data migration.
2. Have a plan for your share plans:
Companies could have multiple plans and awards running at the same time. Making sure vesting and termination rules, exercise windows, expiration dates, contribution limitations and other rules are correctly implemented for each plan and each individual grouping.
3. Tracking and processing day-to-day activities:
Enrolment, grant acceptance, receipt of employee contributions, vesting, exercise, maturity, historical issuances, employee termination and a lot more besides.
4. Taxation:
Calculating and withholding taxes as required, issuing and filing tax forms, and the requirement to stay compliant with local and international tax laws.
5. Accounting:
Recording and reporting equity compensation costs, updating valuations of equity, and again the requirement to stay compliant with accounting standards.
6. Dealing with multi-office locations:
A plan that works great for your London office might not be suitable for the employees in your US branch. You may need to consider country-specific plans that may be more tax efficient than a global offering. You will also need to consider specifics around local cultures.
7. Handling reports:
Everything from annual ’employment-related securities’ (ERS) returns with HMRC, processing transactions, contributions from salaries, taxes, payroll and so on.
8. Compliance in each jurisdiction:
You and your teams should regularly review and monitor regulations along with securities laws when not only designing a plan but also when administering the ongoing running of the plan.
9. Communicate with participants, internal and external parties at all stages, from inception and launch through to vesting and beyond.
10. Mobile workforce:
Communication and compliance get even more complicated when employees move across locations, e.g. a mistimed move may put your employees in a situation where they have to pay more tax or result in them no longer getting the benefits of a tax-favourable plan.

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

Ways to administer your employee share schemes

Employee share administration can be performed in-house, outsourced or both by:

• Onboarding an employee share plan provider
• Creating a spreadsheet and setting up formulas from scratch;

Pros & cons of using an employee share plan provider

An easy way to administer your plan is to leverage an experienced and professional share plan administration provider.

In large private companies, pre-public companies, and public companies, it’s usual to see this function fully or partially outsourced. By bringing in a specialised share plan provider like J.P. Morgan Workplace Solutions, you can focus on your core business while leveraging their experience and knowledge to ensure high-quality share-based incentive programs.

To learn more about other benefits of share plan management software, read here.

Pros & cons of using spreadsheets

It is possible to build a share plan from scratch using a spreadsheet and manage the plan on it. We’ve heard some companies do this in the early days however it doesn’t always scale with their company’s needs as it grows.

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

Find your ideal share plan management provider

Although it’s possible to use a spreadsheet to administer your share scheme when you’re starting out, why not save yourself some time and effort by starting it right?

With share plan management powered by 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 support your teams and help your employees take full advantage of the benefits of employee share schemes.

Request a free demo to find out more about our services.