An employee stock purchase plan (ESPP) is a broad-based stock plan that allows participating employees to purchase stock in their company often at a discount. A successful plan can help employers recruit, reward and retain talent, as well as build financial wealth for employees.<\/p>\n
Many factors contribute to a plan\u2019s success \u2013 and administration is one of the biggest components. In this article, we\u2019ll spell out:<\/p>\n
ESPP administration is the process of implementing, tracking and managing employee stock purchase plans in a company. It involves input from internal and external parties.<\/p>\n
When implementation commences, an ESPP administrator will draft a plan with suggested plan ideas and make suggestions to improve the participant experience and enrolment rate. It\u2019s then followed by a series of activities, including enroling employees in the plan, tracking and reporting changes in ownership, managing participants\u2019 contributions and purchases, communicating with stakeholders and the board of directors, updating policies\/procedures, and staying compliant based on each region your employees are based in.<\/p>\n
Not only are Legal, Finance and HR teams required to input in this process, but also multiple third-party providers \u2013 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.<\/p>\n
ESPP administration is a complex process. Here, we break it down into seven major components for you and your team to consider:<\/p>\n
There are two main approaches to administering an ESPP \u2013 Manual and Automatic.<\/p>\n
At Global Shares, we\u2019ve seen that companies continue to use a spreadsheet to manage their ESPP manually until they realise that the approach can\u2019t keep up with the demands of their expanding business. While a spreadsheet might be a possible approach when you\u2019re starting out, why not make it right at the start by using a scalable method?<\/p>\n
Automated ESPP administration software can mitigate the risks associated with manual processes, such as the danger of human errors and multiple versions of the document circulating among internal colleagues. It also scales with your company as your business and ESPP plan grow. Better still, if you work with an ESPP provider that offers both technology and equity knowledge, you\u2019ll make the most out of the employee ownership.<\/p>\n
Take a glance at the differences of these two approaches:<\/p>\n
| Manual Administration<\/th>\n | Automated Administration with equity knowledge offered<\/th>\n<\/tr>\n<\/thead>\n |
|---|---|
| Lower setup cost<\/td>\n | Higher setup cost<\/td>\n<\/tr>\n |
| Easily accessible<\/td>\n | Takes time to find the right provider<\/td>\n<\/tr>\n |
| Lacks control, resulting in many versions<\/td>\n | Always provides one single source of truth<\/td>\n<\/tr>\n |
| Causes human error easily (no\/low automation)<\/td>\n | Allows automation<\/td>\n<\/tr>\n |
| Time-consuming<\/td>\n | Saves you time and money in the long run<\/td>\n<\/tr>\n |
| Requires an extensive understanding of tax\/compliance in each jurisdiction<\/td>\n | Provides extensive equity knowledge and support for each jurisdiction<\/td>\n<\/tr>\n |
| Has scalability issues as you grow<\/td>\n | Scales with your company<\/td>\n<\/tr>\n |
| Low level of participant engagement<\/td>\n | Allows participants to access\/view\/manage their equity<\/td>\n<\/tr>\n |
| \u2013<\/td>\n | Easily generates multiple reports<\/td>\n<\/tr>\n |
| \u2013<\/td>\n | Provides a regulated trading platform<\/td>\n<\/tr>\n |
| \u2013<\/td>\n | Helps you stay legally compliant in each jurisdiction<\/td>\n<\/tr>\n |
| \u2013<\/td>\n | Secures your data<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n11 ways Global Shares\u2019 ESPP administration solutions could benefit you<\/b><\/h2>\nOur ESPP administration solution combines industry-leading technology with our vast ESPP knowledge and extensive experience in daily plan administration, day-to-day transaction processing and participant management.<\/p>\n
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