NORTH AMERICA CHAPTER

Stewart’s Shops, a northeastern chain of ice cream shops found at gas stations, offers a unique benefits package allowing employees to own a third of the company through an Employee Stock Ownership Plan (ESOP). This program has resulted in more than 175 employees becoming millionaires, as they receive dividends based on the company's success, which are entirely funded by the company. Stewart’s system, resembling a form of socialism, enables employees, referred to as "Partners," to have a vested interest in the company's success, leading to substantial financial gains and long-term stability for both the employees and the company.

Following the SEC's T+1 stock settlement compliance date of May 28, 2024, companies are under pressure to ensure timely share issuance within 24 hours of vesting or option exercises. Failure to manage this process effectively could result in errors, fines, and dissatisfaction among employees.

In a webcast sponsored by Moss Adams, the importance of efficient data transfer between equity programs and payroll systems to support this regulatory mandate was discussed in detail.

Challenges in reconciliation controls

Tim Oakes, a seasoned partner at Moss Adams with over 25 years of industry experience, underscored the critical role of robust reconciliation controls in equity processing. Without adequate controls, errors could slip through the cracks, leading to severe consequences. 

Jesus Renteria, an equity compensation professional, highlighted that inaccuracies in data transfer between systems could result in erroneous tax reporting. Such errors not only incurred tax-related fines but also tarnished the employee experience, necessitating corrective actions such as adjusting tax amounts.

Benefits of reconciliation processes and reporting

A dependable reconciliation process ensures that records remain complete and accurate, even when dealing with multiple payroll systems and file formats. 

By preventing errors such as incorrect tax calculations, robust reconciliation processes playa vital role in maintaining compliance. 
For instance, the IRS mandated that companies deposit taxes exceeding $100,000 within a business day, failure of which could result in penalties. Timely reconciliation of payroll and equity data thus helps companies avoid such fines and stay compliant.

Pros and cons of common reconciliation tools and approaches
Various tools and approaches exist for equity payroll reconciliation, each with its own set of advantages and disadvantages.

• Spreadsheets - widely used for their flexibility and ease of use, but prone to human error and inefficiency with large datasets.
• Automation scripts - effective in automating repetitive tasks and reducing errors, but requires programming expertise for creation and maintenance.
• Custom applications – tailored solutions that offered high accuracy and efficiency, albeit with higher upfront costs and longer implementation times.

Jesus illustrated the effectiveness of automation scripts in streamlining the reconciliation process, especially in complying with the T+1 settlement rule. However, he also noted that the suitability of scripts depends on the specific needs and capabilities of each company.

The importance of accurate and timely tax deposits

Failing to make timely and accurate tax deposits could lead to significant penalties. For instance, if a tax deposit was late by 1 to 5 days, the penalty could be as high as 2% of the unpaid amount. The T+1 requirement further complicates deposit processes, underscoring the critical need for adherence to deadlines.

Equity record keeping and payroll reconciliation

A thorough understanding of the interaction between various systems is indispensable. The equity record-keeping system, managed either by a broker or an internal service, serves as a linchpin, connecting with HR systems, brokers, tax services, and other stakeholders. 

Reconciliation between these systems, particularly between equity records and US payroll, involves ensuring consistency across various fields such as year-to-date compensation and tax withholdings.

Challenges and solutions in payroll reconciliation

Reconciling payroll data can be intricate, particularly when considering factors like unemployment and disability insurance, local taxes, and international mobility taxation. 

To address these challenges, companies may adopt various reconciliation approaches:

• Spreadsheets - despite their widespread use, they are prone to errors and may not be suitable for complex or large-scale reconciliations.
• Scripting tools - offer automation and handle larger data volumes effectively, reducing manual effort and ensuring consistency.
• Purpose-built applications - provide robust solutions tailored to specific needs, though they entail higher initial costs and complexity.

Introducing a purpose-built payroll reconciliation solution

Moss Adams' purpose-built payroll reconciliation solution allows for flexible data ingestion and customization of business rules, promoting accurate and efficient reconciliation. 

The system supports automatic file imports and user permissions, with detailed error reporting and automation features to streamline the reconciliation process.

In conclusion, accurate tax deposits and reconciliation processes are indispensable for compliance and employee satisfaction. 
Whether through spreadsheets, scripts, or purpose-built applications, companies can navigate equity payroll reconciliation confidently, leveraging Moss Adams' knowledge in the field.

Contact Tim or Jesus directly for more information and to arrange a demo of their custom application for equity payroll reconciliation.
 

The healthcare industry is experiencing significant consolidation, often leading to higher prices and reduced patient choice, with many practices being acquired by private equity firms or hospital systems. This trend has driven many physicians away from private practice due to increasing operational costs and regulatory burdens. However, Employee Stock Ownership Plans (ESOPs) present an alternative by allowing physicians to sell their practices to employees, thereby retaining control and reaping financial benefits without sacrificing autonomy or the quality of patient care.

In March, 9,200 Marks and Spencer staff received significant payouts from a sharesave plan, with some employees earning over £10,000 from a £150 monthly investment. Share schemes, such as share incentive plans and company share option plans, help attract and retain employees by giving them a stake in the business and fostering loyalty. Effective communication of these schemes is crucial for employee engagement, with clear, simple explanations and varied methods like videos and mobile apps proving most effective.

The Indian government has clarified that Employee Stock Options (ESOPs) and Restricted Stock Units (RSUs) are exempt from GST, as they are part of employee compensation rather than a taxable service. The Circular confirms that Indian subsidiaries' reimbursement to foreign companies for stock options is not subject to GST, as it is not considered a purchase of goods or services. However, if there are additional administrative fees charged by the foreign company, these fees would be taxable, and GST would apply.

The Global Equity Organization's (GEO) 26th Annual Conference in Prague from 28-30 April 2025 presents an exceptional opportunity for professionals in global equity compensation to advance their knowledge, network with peers worldwide, and witness industry excellence firsthand.

Next year, the event promises to be a transformative experience in the picturesque city of Prague, offering numerous benefits that make it a crucial investment for anyone involved in global equity compensation.

Valuable educational opportunities

One of the standout features of GEO's conference is the ability to earn up to ten continuing education credits. By attending, you stay current with evolving practices and gain insights into future trends that can influence your organization's global equity strategies. Join the 92% of attendees whose learning objectives were met last year, ensuring your time is well spent and highly productive.

Financial incentives

Early birds catch the worm, and in this case, early registrants catch significant savings. GEO offers substantial discounts for those who register ahead of time, making it financially prudent to plan early. Moreover, issuers of global equity compensation plans that secure a speaking slot can attend for free, presenting an unbeatable opportunity for key decision-makers to gain invaluable knowledge and network with peers from around the world.

Robust program: Education and networking

The conference program is meticulously crafted to offer diverse learning opportunities. With over 50 education sessions covering topics from regulatory updates to innovative equity plan design, attendees can tailor their experience to meet their professional development goals.

Networking at GEO's conference is about more than exchanging business cards; it's about forging lasting connections in a conducive environment. Imagine having access to 10 structured networking events designed to facilitate meaningful interactions. These events ensure attendees meet peers from over 20 countries, creating a global network of contacts that can prove invaluable long after the conference concludes. Join the 88% of attendees who felt engaged throughout the event, ensuring a productive and enjoyable experience.

GEO Awards: Celebrating excellence

As an added bonus, attendees will have the opportunity to witness the prestigious GEO Awards ceremony. Each attendee seat at this exclusive event is valued at $350, providing a chance to celebrate and honor excellence and innovation in the field of global equity compensation. This ceremony not only recognizes outstanding achievements but also inspires attendees with new ideas and best practices.

MAKING THE CASE FOR APPROVAL

Convincing your organization to approve travel and registration costs for GEO's 26th Annual Conference in Prague boils down to highlighting the tangible benefits:

• Professional Development: Gain essential knowledge and certifications through accredited sessions.
• Financial Efficiency: Take advantage of early registration discounts and free attendance for issuers.
• Networking Opportunities: Foster global connections at structured events designed for meaningful interactions.
• Industry Recognition: Experience the prestige of the GEO Awards, celebrating excellence in global equity compensation.

Attending GEO's conference isn't just an expense; it's an investment in both personal and organizational growth. The knowledge gained, connections made, and strategies learned can directly impact your company's success in navigating the complex landscape of global equity compensation.

By demonstrating how your attendance will contribute to your professional development and benefit the organization through enhanced knowledge, networking, and exposure to industry excellence at the GEO Awards, you can effectively make the case for approval.

Investing in your professional growth at GEO's 26th Annual Conference is a decision that promises substantial returns, both in the short term and throughout your career.

A recent survey found that 60% of companies globally apply ESG targets to share-based employee compensation, with CO2 reduction, diversity, and corporate governance being the most common areas. Among those using ESG targets, 84% apply them to management board incentives, while 40% use them for short-term incentives and 30% for long-term incentives. The survey also indicated that institutional investors and proxy advisors significantly influence these targets, and a growing number of companies are focusing on ESG issues as part of their employee compensation strategies.

A phantom stock plan is an employee benefit that provides the financial benefits of stock ownership without actual stock, tracking the company's stock price and paying out any resulting profits. These plans can be structured as appreciation-only, which pays out based on stock price increases, or full-value, which includes the value of the stock and any appreciation. Although phantom stock plans offer flexibility and align employee incentives with company performance, they do not provide actual ownership or voting rights and are taxed as ordinary income, requiring careful legal and tax compliance.