Why You Need Equity Management Software

DALL·E 2023-11-17 11.05.01 - Digital Illustration_ A modern, sleek design representing equity management software, using CompIntelligence branding colors. The image features abstr

Equity compensation plans are a powerful way to incentivize employees, attract and retain talent, and free up short-term capital for reinvestment by offering company stock plans instead of increased salaries and cash bonuses, which can be a win-win for both employees and the company bottom line.

However, equity compensation management, also referred to as stock plan administration, poses a number of administrative challenges, especially at scale. The combination of tax compliance, employee demographic changes, payroll management, and straight-up tracking and reporting becomes a cumbersome process even for the most seasoned administrators.
Equity management software solves these challenges by automating and simplifying many of the manual tasks that go into proper stock plan administration.

If you run a company, finance department, or human resources department that administers an employee stock compensation package, investing in equity management software is paramount to the success of your plan.

This article explores the purpose of equity management software within your organization, breaks down who benefits from it in your company, and clarifies just how important of an investment it is for the long-term success of your employee stock plan.

The Purpose of Equity Management Software

Conceptually, equity plans for employees can seem straightforward. As part of compensation, employees are offered various types of equity, most commonly company stock options or awarded shares in the company through RSUs, allowing them to buy the stock at attractive prices or be issued stock directly, thus making them a direct stakeholder in the company and giving them financial benefit from the growth and success of the organization.

However, the nuts and bolts of administering the stock plan become drastically more complex, especially at scale.

When employees exercise a stock option, there are administrative steps that your company must take to ensure that process occurs properly and in a tax compliant manner. Similarly, if employees are awarded stock directly, this has tax withholding and income ramifications for the pay period in which the stock was issued.

Manually administering these processes involves communication between HR and payroll among other administrators, usually through email, shared spreadsheets, and other manual data entry processes. These bring with them human error risks, version control issues, and other basic headaches associated with data entry and manual administration.

Equity management software automates this entire process. Each department has access to the stock plan administration platform, which automatically handles the data entered and creates the necessary deliverables that each department needs, whether those are PDFs, spreadsheets, customized emails, memos, or any number of outputs needed for the end users.

The equity management software also automates the process of issuing stock and allowing employees to exercise stock options, depending on the specifics of the plan. All of this occurs in a tax compliant manner without the need for human oversight on each step within the process.

To summarize, the purpose of equity management software is to simplify that massive workflow challenge associated with administering a company stock compensation plan.

Which departments use Equity Management Software?

Virtually every department that has a hand in equity compensation administration will use the equity management software. In particular, HR, Legal, and Finance will interact with the platform on a regular basis.

The most heavy users are typically the HR and Compensation departments responsible for payroll and benefits.

When to Implement Equity Management Software

Generally speaking, implementing equity management software as early as possible into your company workflow is the best solution. After all, why delay the benefits associated with automating this complex workflow when it will inevitably be required regardless?

If your organization is still small, it can be tempting to handle everything manually. With a handful of employees, you might see the benefits of automation as marginal and the onboarding cost to be not worth it or at the very least, something that can be kicked down the road and dealt with at a later date.

The fact of the matter is, even with small organizations, the potential for costly errors exists. From data entry to spreadsheet single-source-of-truth issues, a single error can quickly compound and lead to unexpected time costs as well as the appearance of unprofessionalism to the employees being issued stock plans.

The right consulting firm makes implementing, onboarding, and administering the equity management software painless and cost effective.

From training to technical problem solving, outsourcing the process of equity management software implementation is the best choice whether you are automating the process from the get-go or finally coming to the realization that manual administration is simply not feasible for your organization.

How Equity Management Software Benefits Your Organization

If it’s not already clear, equity management software is a time and money saving method to seamlessly administer your stock plan across your organization.

Automating the tedious processes required for stock plan administration can reduce the personnel required in each department, synchronize each subcomponent of the administration process, insure yourself against costly errors, and ultimately, allow your company to focus on its primary important workflows.

Additionally, the right equity management software improves participant engagement by allowing ease of use and real-time visibility of their current stock awards through employee portals.

Employee portals are a vital component of translating your equity compensation plan into improved motivation and performance from the individuals that make your company run.

Your employee engagement and participation in stock plans is where the rubber-meets-the-road in terms the driving reason for offering stock compensation in the first place, so this is far from an afterthought when it comes to successful stock plan administration.

On top of all this, since the software functions just as well with a handful of participants as it does with hundreds or even thousands of employees, equity management software also makes growing and scaling your organization far easier and more cost effective than scaling up the departments you need for manual stock plan administration.

As with any good business investment, automating stock plan administration with equity management software allows you to put more capital into growth, minimize staffing costs, and helps your company to perform better in the competitive marketplace.

The Role of Support Tools like CompXchange

You have a lot of great options when you’re looking for Equity Management Software. Whatever your organization decides to adopt, maximizing your automation between systems is important. Even terrific EMS systems often require manual importing and exporting of data between your companies payroll, HR, or Equity systems. 

These tools have several names such as Extract, Transform, and Load (ETL) tools or “middleware.” They don’t provide Equity Management, but rather facilitate and support the tools that do. CompIntelligence CompXchange software specializes in automating data between systems, and it helps teams get the most efficient automation possible. Support tools can easy move demographic updates, and YTD tax information between your organization's systems, to name a few examples. Having data that is current up to the day can be critical in the event that an employee exercises a stock option or has a restricted stock release. You can learn more about our CompXchange solution here.