Own Your Global Talent Strategy With Equity Ownership

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Benefit packages are intended to attract and retain top talent – so they must provide the features workers want most. Offering equity compensation, whether through an employee stock ownership plan (ESOP) or another type of plan, can help a company stand out and lock down top global talent in today’s competitive labor market. According to a study published by the Employee Ownership Foundation,  companies with equity ownership plans are three to four times more likely to retain staff.

Here are several considerations to help determine if an equity ownership plan is a benefit your company should be extending to workers hired through an Employer of Record (EOR).

The pros and cons of equity ownership 

Before developing an equity compensation package, it is essential to understand the main advantages of having a plan in place as well as the potential pitfalls.

Pros Cons
Talent Development: With equity ownership, companies can stand out among competitors and secure top global talent. It also facilitates greater teamwork and an ownership mentality among your workforce.  Administration: Equity ownership requires management and administration, including plan valuation, legal services and trustee fees. Extra due diligence may be required for a cross-border workforce. 
Long-Term Benefit for Workers: Workers enjoy the opportunity to share in company growth. As the company grows, workers can build a comfortable nest egg.  Liquidity Requirements: The required cash flow can cut into what’s available to reinvest in operations, which can pose a challenge for some earlier-stage companies.
Tax and Investment Incentives: In many jurisdictions, equity ownership plans offer significant incentives for both company sponsors as well as workers.  Not a Fit For All Workers: Equity is less attractive in some jurisdictions, due to tax regulations. Bonuses and commissions may be preferred by workers. 

The EOR hiring model and equity compensation

Most ESOPs or other types of plans allow for consultants or advisors to participate. This is usually the easiest way for a worker hired through an EOR to participate in the plan as, legally speaking, they are not an employee of the organization. 

However, it is critical to review any equity plan in detail, preferably with the help of an expert partner, to see if there are clauses that restrict providing company equity to a foreign worker, consultant or advisor.

Steps for implementing equity ownership

  • Explore whether equity ownership is the right incentive for your company and the workers engaged through an EOR.
  • Outline the requirements and tax implications for offering equity ownership. Tax liabilities should be weighed for both the company and workers.
  • Determine if your plan should offer qualified or non-qualified stock options. The implications will vary country to country.
  • Understand what will happen to unvested options. Unvested options are treated differently in some countries.
  • Conduct a regulatory compliance audit and obtain pre-approval from the relevant government authorities if necessary.
  • Consider what will happen if you do incorporate locally. There may be preferential tax treatment or consequences for equity agreements in place.

Getting started with an equity ownership plan

Each country and payroll jurisdiction is unique in how it treats equity ownership. Therefore, extra due diligence is required of companies that wish to offer equity ownership to workers hired through an EOR. As the manager of your ESOP or other equity plans, your EOR partner should be able to help you identify benefits, opportunities, implications and consequences. 

GoGlobal’s customized services include global tax calculations, processing and payment for equity options in each of your active payroll locations. We offer the global expertise, innovation and support needed to deliver equity ownership for your company and your workforce.

Contact us to talk with an international HR expert and learn more about offering equity ownership to your cross-border workforce.