GEO INSIGHTS

Mphasis Limited announced the granting of 25,000 stock options under its ESOP 2016 and 12,000 restricted stock units (RSUs) under its RSU Plan 2021 to eligible employees, effective November 7, 2024, as approved by its ESOP Compensation Committee. The stock options have an exercise price of ₹2,900, with equal vesting over five years and a 60-month exercise period, while the RSUs, priced at ₹10, follow a progressive vesting schedule of 10%, 20%, 30%, and 30% over five years, catering to both Indian and US-based employees. These equity grants are administered through the Mphasis Employees Equity Reward Trust, ensuring compliance with SEBI regulations, and the announcement was officially submitted to the BSE and NSE by Senior Vice President and Company Secretary Subramanian Narayan

Employee stock ownership plans (ESOPs) are increasingly popular in Southeast Asia and India, with 80% of startups now offering them, up from 60% in 2021, as founders recognize their value in attracting talent and managing cash flow. Despite this growth, many founders still lack a deep understanding of ESOPs, underlining the need for better structuring and education to maximize their effectiveness. Meanwhile, funding news includes Easy, an Indian fintech startup, raising $35 million for mortgage technology expansion, and Razer Gold receiving in-principle approval as a major payment institution in Singapore, among other significant industry updates.

The recent Budget introduces changes that will impact the cost and compliance of employee share plans, including an increase in employers' National Insurance Contributions (NIC) from 13.8% to 15% from April 2025, which could make tax-advantaged share plans more appealing. Additionally, increases in capital gains tax (CGT) rates and reductions in CGT exemptions may lead to higher tax obligations for employees, potentially affecting the attractiveness of these plans, while employers may need to enhance support and communication to help employees navigate these changes. For internationally mobile employees, the new tax regime replacing the remittance basis introduces limitations and complexities, requiring employers to reassess their compliance strategies and tax equalization policies.

A 2024 study reveals that employee stock option plans (Esops) have grown in popularity among startups, with 78% of startups offering them, up from 59% in 2021, and one in three now extending Esops to all employees. Founders increasingly recognize Esops as vital for cost savings, culture-building, and talent retention, yet a lack of deep understanding among founders persists, especially regarding tax implications and option exercise requirements, which risks employee misunderstandings. Despite low initial grants, 72% of employees prioritize Esops when job-hunting, viewing them as a significant benefit, highlighting the need for startups to better educate themselves and their employees on the intricacies of these plans.

Thales has launched its 2024 Employee Share Ownership Plan, allowing employees across 36 countries and retirees to purchase shares at a 20% discount with a 50% matching contribution on investments up to €500. The plan, which aims to strengthen employee alignment with the company’s goals, offers 600,000 shares at a discounted price of €119.69, with participants required to hold the shares for five years, except under early release conditions. This initiative, set to run from November 4–24, 2024, provides tax-efficient savings and investment opportunities for employees and retirees, supported by local legal and regulatory compliance.

The Investment Association (IA) has released updated remuneration principles, offering greater flexibility for UK-listed companies to structure executive pay in ways that attract and retain top talent in a competitive global market. Key changes include relaxed dilution limits, with the 5% restriction on discretionary share plans removed, and allowances for evergreen employee share plans that no longer require shareholder approval every 10 years. While these updates provide companies with more discretion, they must still align with existing shareholder-approved remuneration policies and plan rules, ensuring compliance while leveraging the new flexibility to meet strategic objectives.