Equity compensation can be a valuable offering for employees and contractors. It allows your organization to re-invest funds for future growth while providing a more attractive employee compensation award, and greatly helps with employee retention.
However, implementing and managing equity compensation plans is not without its challenges. Awards are tracked in equity systems, and integrating those equity systems with your existing human resources system and payroll software can be a very manual process.
In this article, we look at some of the workflow challenges associated with administering an equity compensation plan and discuss how CompXchange simplifies this process with customized workflow solutions that meet your company’s needs.
Finally, we touch on how the CompIntelligence CompXchange solution helped several of our clients drastically reduce the time and staffing costs associated with administering their Equity Compensation plan.
Equity Compensation comes with challenges, many of which can be simplified through the CompXchange system. These challenges range from tax compliance in multiple countries, ensuring data security, and delivering accurate files to your equity compensation system.
Below are the breakdowns of a few processes that can be streamlined via custom CompXchange platform solutions.
Different equity awards create different challenges for administrators. Stock Options can be exercised at any time once they have vested, so data needs to be kept up to date in the equity system to ensure that the exercise can be completed accurately. This includes ensuring demographic info like employment status and location is up to date, as well as payroll info like year-to-date tax information is also updated. Restricted stock units/awards are a bit easier to plan for because you know when the vesting events are going to happen, but these are usually much larger events happening for many, sometimes hundreds of employees on the same day.
CompXchange automates the inbound data from HRIS and payroll to the equity system, and maps the data in the format and order that equity compensation systems require. This HRIS data includes employee essential demographics, ancillary data, and derived values such as ESPP eligibility, tax codes/rates, and foreign currency conversion rates. Payroll data such as year-to-date totals, ESPP contributions, and payroll identifiers are also integrated into the file sent to the equity system.
CompXchange also automates the reverse trip - sending the outbound data from the equity system back to HRIS, Payroll and even some data for Finance/Accounting. This HRIS data includes grant data for employee statements. The Payroll data includes taxable income for each transaction, ESPP enrollment/changes, and foreign currency conversion information. Data for Finance and Accounting includes expenses for forecasting, participant and grant data for people planning and even a full data dump for external planning and analysis in systems like OneStream and Hyperion.
Your organization must complete its annual SOX Controlled Audit, which requires monitoring, tracking, and reporting of the following:
To ensure compliance, you must be able to demonstrate proper security for data management as well as training for all staff who handle the financial data. The SOX controlled audit also ensures that the correct number of shares are transferred to the transfer agent.
The CompXchange workflow solution automates the process of auditing this data, ensuring shares transferred are correct, and identifying any discrepancies in the transfer. The deliverable is a password protected excel spreadsheet that contains multiple tabs detailing all data relevant to the process.
Organizations with employees or subsidiaries in multiple countries face the challenge of compliance with all local tax regulations and codes. This requires integration between payroll software such as Workday and the deliverable to the equity compensation administrator that accounts for separate tax rates across payroll groups as well as international currency exchange rates.
CompXchange reduces this process from several days in some cases, to several minutes. Given the frequency and volume of these deliverables, the organizational cost savings can be monumental.
One CompXchange client has a workflow involving 45 complex audit checks to ensure capability with the equity compensation plan setup. Additionally, the international participants had a separate series of checks to verify local payroll tax rates.
This required splitting the payroll groups into separate files for individual data verification. The client must create an FCT file to deliver to their equity compensation administrator for updates within the equity compensation system.
CX simplified this workflow to automate each audit check and file creation process across all payroll groups, resulting in appropriate file deliverables. The solution reduced this process from 8 weeks to 4 days, and eliminated the need to hire temporary staff to oversee this process.
Another client with multiple subsidiaries faced the logistical challenge of each subsidiary having its own restricted stock unit (RSU) and performance stock unit (PSU) restraints. Each subsidiary manager sends a separate spreadsheet to the company, which quickly became a version control issue as well as a file format consistency challenge when managers modified their files on a case-by-case basis.
In this case, CompXchange created a custom excel template automatically for each subsidiary. Managers could populate the template and import it back into the CompXchange system for validation and verification. Each subsidiary could make adjustments within a custom CompXchange user interface as part of the solution. The custom CompXchange platform allowed corporations to lock the versions during review, then unlock them if changes were required.
The end deliverables were individual customized update emails to each participant, a board memo to the corporate finance board, and an Equity Edge Online grant file.
The process resulted in improved accuracy for the data, individual subsidiary ownership of budgets and equity provisioning, and a minimum of 1 week’s work time saved for each instance of deliverable.
At CompIntelligence, we specialize in delivering custom equity compensation solutions that save your organization time and money across each process required to deliver EC to your employees.
With over 2 decades in business, over 150 employees, and client references across verticals from small private firms to Fortune 100 companies, we have a track record of success with integrating technology to simplify your stock plan administration.
With the largest network of stock plan administration and technology resources in the industry, we work as an extension of your team to ensure your organization’s success in streamlining equity compensation processes by creating, onboarding, and administrating your custom CompXchange platform.
Contact us today to find out how CompIntelligence can reduce the time and financial cost of equity compensation administration for your company.