GEO INSIGHTS

A proposed amendment to the Income Tax Act seeks to simplify the taxation of income from employee stock option plans, allowing employers to choose between the current system of deferred taxation or reverting to pre-2024 taxation practices. The amendment addresses complexities introduced in 2024, such as tracking taxable moments, avoiding double taxation abroad, and coordinating taxation with insurance premiums. Transitional provisions would allow employers to apply postponed taxation retroactively for 2024 without penalties, provided they notify the tax authorities within two months of the amendment’s effective date.

The New Zealand Government has introduced a Bill increasing the thresholds for exempt employee share schemes, offering significant benefits to both employers and employees. Effective 1 April 2025, the maximum value of shares an employee can receive annually will rise from $5,000 to $7,000, while the maximum permissible discount on share market value provided by employers will increase from $2,000 to $3,000. These changes reduce tax liabilities for employees and allow companies to offer more attractive share schemes, but employers must update their plan rules to fully leverage the new thresholds.

The 2024 Renaulution Shareplan achieved remarkable success, with 43% of eligible Renault Group employees participating, up from 36% in 2023. Over 93,000 employees will benefit from 7 free shares each, and nearly 46,000 employees subscribed to additional shares at a discounted price, resulting in the transfer of approximately 1.88 million shares, representing 0.64% of Renault SA's capital. This initiative reflects strong employee confidence in the Group’s strategy, bringing total employee ownership to 5.74% of Renault SA's capital, as the company works toward its goal of 10% employee shareholding.

Luxury goods brand LVMH has launched "LVMH Shares," an employee share plan covering 70% of its global workforce across 11 locations in Europe, North America, and Asia. Eligible employees will receive a matching contribution of shares and a 20% discount on the share subscription price, which equals the opening price of LVMH shares on the Euronext market; the scheme involves 200,000 newly issued shares available from 24 October to 13 November. The initiative aims to involve all employees in the group's development and show appreciation for their commitment, emphasizing LVMH's belief that its employees make all the difference, as highlighted by Chantal Gaemperle, group executive vice president of human resources and synergies.

The UK government is considering converting the Post Office into an employee-owned company through an Employee Ownership Trust (EOT), similar to the John Lewis model, which would give employees a stake in the business and a say in its operations. The move comes as EOTs have become more popular, with calls for ownership reform at the Post Office intensifying due to recent governance issues and the Horizon IT scandal. While EOTs offer benefits like profit-sharing and increased employee influence, union representatives emphasize that governance changes are essential for the model’s success at the Post Office, advocating for a cooperative approach with greater accountability.

Employee Share Schemes (ESSs) are increasingly popular in advice businesses for talent retention, though their feasibility depends on a firm's size and structure. Integro Private Wealth, for example, has introduced an ESS to attract and retain talent, especially in wealth management, where long-term client relationships are crucial. While ESSs offer financial security and engagement for advisers, smaller firms face implementation challenges due to scale and structure, which leads some to consider mergers to enable broader employee ownership.

LVMH has launched "LVMH Shares," a new international employee shareholding plan targeting 70% of its workforce across 11 regions in Europe, North America, and Asia, providing preferential subscription terms to enhance employee involvement in the Group's growth. The initiative reflects LVMH's commitment to its values of innovation, excellence, and long-term partnership with employees, highlighting the crucial role of its workforce. Employees can subscribe to shares at a 20% discount during the subscription period from October 24 to November 13, 2024, with securities delivery scheduled for December 18, 2024, and shares to be listed on Euronext Paris.

Syfe has launched its first-ever employee share buyback program, allocating up to SGD 5 million to enable nearly 200 current and former employees to benefit financially from their contributions. This milestone initiative, rare for a private company at such an early stage, underscores Syfe’s commitment to rewarding team members who have driven its growth and success. With a strong focus on expansion, profitability, and team engagement, Syfe continues to set a new standard in employee rewards while building a future of shared wealth and financial independence for its stakeholders.

Enhancing your global equity compensation strategy requires a deep dive into how participants across the world perceive and engage with these programs.

During a webinar held on 19 September 2024, Emily Cervino and Sarah Francis from Fidelity explored global perspectives, delving into their research that unveiled unique characteristics of equity compensation participants from Canada, China, Germany, India, the UK, and the US.

The session also shed light on how factors such as age and gender influence perceptions, offering invaluable insights into satisfaction, confidence, and educational needs.

In today’s competitive landscape, understanding these nuances is crucial for tailoring strategies that resonate globally, ensuring your equity compensation plans are both effective and impactful.

The rising importance of equity compensation

Equity compensation is a cornerstone of employee satisfaction and retention worldwide. Research indicates that 6 out of 10 companies are expanding eligibility for equity awards, with more than half increasing the value of these awards. As companies expand globally, the need to tailor these plans to meet regional differences becomes increasingly important.

Multinational organizations, some operating across more than 50 countries, must adjust for varying local requirements and cultural contexts to ensure their equity plans succeed.

Regional perceptions and behaviors

The webinar underscored how employees in different countries engage with equity compensation in distinct ways:

• Canada: Canadian participants are highly engaged, with 50% having sought professional financial advice, leading to higher confidence. About 68% plan to use stock plan assets for long-term goals like retirement.
• China and India: In these emerging markets, many participants are first-time stock owners, emphasizing the need for education on financial literacy and the long-term benefits of stock ownership.
• Germany: German participants have strong financial literacy but lower confidence in decision-making due to concerns over stock price volatility, underscoring the need for more structured educational resources.
• UK: Nearly half of UK participants are first-time stock owners with lower confidence, though satisfaction with Employee Stock Purchase Plans (ESPPs) is high due to payroll deductions and discounts. More education could address the knowledge gap.
• United States: In the US, a gap exists between intentions and actions—many plan to use equity compensation for retirement, but few follow through. Clear communication about the long-term benefits can help close this gap.
• India: Indian employees are highly engaged, often seeing equity programs as a primary source of retirement savings. Despite regulatory challenges, participation remains strong, reflecting broad enthusiasm for equity plans.

Actionable insights for a global strategy

Global equity compensation strategies cannot follow a one-size-fits-all approach. To ensure success, companies must adapt their programs to suit the specific needs of different regions. Key recommendations from the webinar include:

• Localized education: Offering region-specific resources and financial literacy tools empowers employees to make more informed decisions, especially in regions where professional advice is less accessible.
• Cultural relevance: Aligning equity strategies with local cultural values ensures better engagement. While long-term financial planning might resonate with Canadian employees, other regions may have more immediate financial concerns.
• Ongoing assessment: Continuously evaluating the performance of equity plans by region helps identify areas for improvement and adaptation, ensuring that the plans meet the evolving needs of the workforce.

In conclusion, tailoring equity compensation strategies to the specific needs of different regions is essential for boosting employee engagement and satisfaction. By providing localized education, understanding cultural differences, and regularly assessing plan effectiveness, companies can create compelling global equity programs that truly resonate with their diverse workforces.

This article is sponsored by Fidelity, a leader in helping organizations maximize the value of their global equity compensation strategies.

Contact Emily or Sarah directly for more information.

View a recording of the webinar on GEOlearn HERE.

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Fidelity data as of March 2023.