Employee Share Option Software

A share option is the most popular form of equity companies offer to their employees as part of their compensation packages. To manage employee share options can be simple if you bring in the right partner.

J.P. Morgan Workplace Solutions deals with equity plans for large and small, private and public companies whose locations and employees are spread across the globe – this means we deal with every type of share option grant imaginable and global tax/regulatory/compliance implications.

Today, we’ll show you how to leverage our employee share option software to simplify the administration during:

• Granting share options
• Vesting
• Exercising
• Tax calculation

Granting share option awards

This huge range of share option grants through our share option module means clients can display to participants and receive reporting on their share option grant data the way they want it.

Track every type of share option and administer them the way you want.

USA Option Grant Types:

• NQO – Non-Qualified Stock Option
• ISO – Incentive Stock Option
• PNQO – Performance Non-Qualified Option
• PISO – Performance Incentive Stock Option

UK Option Grant Types:

• EMI – Enterprise Management Incentive
• CSO – Company Share Option
• UKASO – UK Approved Share Option
• UKUSO – UK Unapproved Share Option

Rest of World Option Grant Types:

• OTCO – Over the Counter Option
• PO – Premium Option
• ESO – Employee Share Option
• CGO – Capital Gains Option

Setting vesting schedule & weighting

Share option vesting is the process of gaining 100% ownership of an option. When employees are granted share options on day one, they don’t have full control over them until the vesting period has passed. Then, they can be released to the participants.

Admin’s Side:

In our system, you can define the vesting schedule for your share option grant. Whether it’s a simple 3-year 100% cliff vest or a more complex 48-month 2.08% vest with associated rounding, you can set it up for your share option. You can also define vesting weighting – the amount of the award to vest each year. (Note: vesting schedules can also be set up as performance-based for performance shares.)

Once share option vesting has been set up, then the automated vesting service will kick-off. It means that the vesting schedule associated with the option grant is updated continuously to ensure a correct live balance at all times.

Reports are also directly tied into this vesting service so that share option reports are always reporting the correct vested and unvested balances.

Participants’ Side:

Participants will also see the same on their employee portal, a multi-lingual and multi-currency user interface that allows participants to have 24/7 online access to their awards, see their number of vested and unvested shares, as well as intuitive statements showing future vesting coming their way with associated monetary values of those vesting share option grants.

Setting exercise methods for share options

An exercise of share options occurs when a participant takes up their right to buy the vested shares at a pre-set exercise price (or strike price) after the vesting period. At the time of exercise, there’re some costs participants need to pay:

• Exercise price (strike price)
• Fees and commissions: e.g. broker fees and wire fees
• Tax

Admin’s Side:

As an industry-leading share option management provider, J.P. Morgan Workplace Solutions’ intuitive ‘Exercise Wizards’ have never been easier. With ‘Exercise Wizards’, we work with you together to define exercise windows (the period when participants can exercise their awards through the employee portal) and blackout periods (the period when the company’s employees are prohibited from trading its securities).

Participants’ Side:

At the same time, participants are clear on what’s available for them to exercise when they log in to their accounts. They are guided through the process with our online “Exercise Wizard” when they decide to exercise. Our share option management software facilitates the following exercise methods (how participants can complete exercise transactions) for all share option grants:

1. Monetary Payment (Hold All)
The participant uses their personal funds to cover the associated costs (exercise, fees and applicable taxes). He/she would pay the costs either by check, wire transfer or payroll and would then receive the shares.

2. Sell to Cover (STC)
The goal here is to cover the costs associated with exercise, fees and applicable taxes by selling shares equal to the costs. The remaining shares balance will then be issued to the employee.

So, participants aren’t required to pay for the shares upfront as with the first method.

3. Exercise & Sell All
The goal here is to generate an immediate cash balance.
Like Sell to Cover, there is no requirement to make an upfront payment as the associated costs (exercise, tax, fees etc) are paid with the proceeds of the sale of shares. The net proceeds in cash are then distributed to the employee.

4. Withhold to Cover Exercise
Typically used by private companies this exercise method is similar to Sell to Cover except that your company keeps the number of shares equal to the associated costs prior to award issuance.

Automating tax calculation

Math is not everyone’s strong suit so we’re here to simplify it.

Admin’s and Participants’ Side:

Everyone knows how important it is to accurately file your income tax return. Our employee share option software automatically calculates accurate transaction taxes for your participants.

The system can apply taxes by setting up tax rates and codes assigned to participants or participant groupings.

If provided with applicable income and tax payment information by you, we can feed the system what is needed to automatically calculate accurate transaction taxes.

Getting support for share option administration

Admin’s Side:

You’ll be assigned a dedicated client manager (CM) at a corporate level and a dedicated team of share plan analysts.

Your CM will provide you with an assurance of a smooth transition from our tendering for the project, to the implementation of your plans on our system, right through to a cooperative, working relationship.

Your share plan analyst team will undertake all the necessary administration and record-keeping tasks associated with the operation of your share plans in accordance with the relevant tax legislation and regulatory body requirements. Some of the high-level services are:

• Regular liaison and support for payroll
• Management of joiners, new hires, leavers and cancellations
• Exercise of options
• Management and administration of all payments to participants, following the sale of shares
• Collection of income tax and any other relevant taxes or social insurances
• Assistance with tax and regulatory filings as required

Participants’ Side:

Ensuring your participants understand and appreciate what they are receiving when they are granted share options is paramount to what J.P. Morgan Workplace Solutions does.

To achieve this, we offer client support in a range of languages and provide an extensive range of resources:

• Educational videos explaining what a share option is
• Glossaries providing concise explanations on share option grants
• Interactive share option calculators which allow the participant to model their share option grants
• Others: FAQ, user guides, tax guides etc

What are modelling calculators?

Modelling calculators are available in the employee portal to give participants an insight into their potential gains if they want to sell their awards. It lets them test out a sale without commitment.

The calculator provides estimates of taxes, exercise costs and net proceeds, ensuring that when you’re ready to sell, you can make the right decision on how and when they trade.

Summary of our employee share option software

To wrap up, here is a summary of our services that can help you with employee share option administration.

General:

• Technology and support: We do the heavy lifting work for you – setting up your plan and offering you administrative efficiencies
• Ease of Administration without a steep learning curve
• Customised Reporting: You can access all the reporting information e.g. financial and business intelligence (BI) reports in different formats
• Excellent support: Your dedicated client manager and a team of share plan analysts ensure smooth transition and operation
• Data security supported by a team of in-house cyber security and IT professionals
• Compliance: You’re assured of the highest level of compliance to maintain data integrity and accuracy.
• An Engaging Employee Portal: It enables your employees to have control over their share option awards.

Employee Portal:

• A multi-lingual, multi-currency & multi-security user interface that allows participants to access all their equity and share plan information 24/7, e.g. award balances, historical transactions, future vesting coming their way
• Self-help platform enabling participants to accept/decline, exercise and sell a share option grant online
• Ease of trading, with total integration to our broker module
• Service helpdesk for participants: multi-lingual support
• Extensive resources: FAQs, videos, how-to guides, modelling calculators

Vesting:

• Flexible vesting settings allow any type of vesting schedule and vesting weighting
• Correct data for admin and participants: The number of vested and unvested share option awards is correctly updated automatically
• Intuitive statements are available for participants showing when their future vesting is and the associated monetary values
• Vesting schedules can be saved and re-used. So, when you need to grant share options with the same schedule in the future, you can re-use the existing ones to save you time.

Exercising:

• Multiple methods for exercising share options for participants to choose from
• Flexible settings with ‘’Exercise Wizards’’, e.g. set up exercise window and blackout period, and disable unsuitable exercise payment methods.
• Automation: Once awards vest, shares are released to participants via an automated release transaction.
• Transparency: Details of transactions will be available for the participant to view. An exercise request will also be created within the admin page.

Taxation:

• Automatically calculate accurate transaction taxes
• Modelling calculators giving insights into participants’ estimates of taxes and net proceeds

At J.P. Morgan Workplace Solutions we provide employee share option management software and support services to companies all over the world.

Transform your share option plan administration software with our industry-leading technology. Our team of equity compensation professionals would be delighted to discuss your share plan requirements.

Have questions about our share option software and services? Request a free demo to find out more about how we can help you take your equity compensation plans to the next level.

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