ESOP AdminESOP Admins: Employee Ownership Plans come under different names in different countries, (CSOP in the UK, SAYE in several countries, SIP in others) here we use ESOP as a generic term to refer to all Employee Share or Stock Ownership Plans.

If you administer an Employee Stock Plan, Share Plan or Options Plan, or have been tasked by your management to setup, administer, improve or takeover an existing plan or looking for better answers on administration, legal or tax issues associated with your existing employee plan then ESOP World Forum can help you. We can provide you with independent information and access to experts to assist your decision making process. You can get access to an introductory level of ESOP Admin information for free. If you then want to access more in depth in information, including ESOP Admin education materials or get advice for our expert members including expect in your area then our ESOP Administrator Membership will prove excellent value, not just now, but through your the lifetime of your ESOP implementation process and to maximize the value from your ongoing administration.

 ESOP Admin Overview

ESOP administration can appear to be a complex and time consuming task but with the right planning and organisation based of industry best practise you can make this run smoothly. Through ESOP World Forum you can access experts and thought leaders in the individual fields of ESOP payroll, taxation, legal HR and plan administration as well as tools and software solutions and services than can make the task much more manageable and to get you the right solution for your company.

Here are some of the specialist topics you can find details on:

Private Company:  Employee stock ownership plans in private companies have to provide the additional facilities for valuation and secondary or internal markets without public trading to allow for employees to retire, leave the company or adjust their stock holding for other valid reasons.

Post Startup Company:  Smaller companies need to ensure efficient administration of their shareholding including CAP Table administration to ensure that any funding or ownership questions can be answered easily and without ownership, financial, tax or legal complication.

Public Company:  Employee shareholders and their different shareholdings and the public reporting requirements need to administered efficiently and usually as a public company will be a larger company this can be a larger task. There can also be different categories of shares with different trading blackout restrictions for legal reasons. This can benefit from a number of  tools available such as for stock plan administration software and financial reporting tools for corporate clients and employees.

The different names for the various employee share and stock plans can be confusing but ESOP World Forum can help you learn how to find the right solution for you from the best people – those already benefitting from them: business owners, executives, HR and plan administrators and last but by no means least employees and plan participants.


 How to setup an ESOP

Employee Share Ownership Plans (ESOP) & equivalents in different countries around the world are widely established (over 10,000 companies in USA with over 10.3 million employee members in 2015) and long established (since 1950s in USA but with most growth in 1990s). Expertise in how to setup, administer and optimise ESOPs is long established and you can take advantage of that at ESOP World Forum.

ESOP Setup costs can vary considerably but start around $40,000 (€30,000)  meaning they can be suitable from post-startup and mid-sized companies. In most cases setup costs are tax deductible expenses

You need advice on financial, legal and tax issues  based on the rules for your country or state and ESOPs may need prior approval by the tax or revenue authorities.

You need trustees to oversee and administer your ESOP and to consider how they are appointed and how they will be compensated.

Your HR and payroll people will need assistance in setting up any payroll amendments and in producing the briefing and regular update materials for employees.

The process and steps for for setting up an ESOP (or its equivalent) will be something like this:

1 – Initial Consultation & Planning

Consultations are held with shareholders and directors in order to arrive at agreed objectives and timelines for the ESOP. Employees may or may not be engaged on the willingness to engage in an ESOP. If employee enthusiasm for participation is low then it would be prudent to know this before spending setup time & cost on an ESOP. The level of employee enthusiasm will be influenced by the quality of information provided to them – poor information on owner’s timelines & objectives  will not help employees’ decision making. Agree goals, objectives and messages with business owners and then draft materials for the employee discussions.

2 – Feasibility Study and Design

ESOP feasibility studies typically may include

  • preliminary company valuation to determine pricing of the ESOP and stockholders’ equity analysis (how ESOP affects existing shareholders and the company’s financial performance)
  • outline to determine the ideal transaction structure, plan features, and its administration (trustees, qualification rules, rules for leavers, etc.)
  • plan finance and taxation outline
  • it may also include some or all of: legal advisers, valuation specialists, ESOP consultants, investment bankers, lenders, senior management team, and the shareholders) or it may just be all managed by one legal or accounting or legal firm

At the end of this stage before deciding to proceed with the ESOP: further consultation with owners, existing shareholders, senior management and possibly employees or their representatives.

3 – Implementation Planning

Implement the ESOP, put in place the necessary legal and financing elements, appoint any trustees and, where required, get approval from the tax or revenue authorities. Put HR and payroll processes in place (including how the plan will be administered – usually through installing appropriate software tools which must be evaluated, selected and implemented).

Fully engage employees in the process, making clear the benefits and risks before they sign up to the plan.

Decide how employees will get their ESOP tax advice: from the company in-house or  better to get outside independent tax advice for employees.

4 – Rollout and Administration

The ESOP can be be rolled out. Make regular reports available to the employees to ensure maintaining ESOP enthusiasm and get employee feedback and address employee concerns. Employee ownership can mean that employees start acting like owners and shareholders  and they need to be treated as such with regular reports to them on company business and financial matters. This helps deliver one of the main benefits of an ESOP: the improved performance of the business as employees start to act like owners (or shareholders).

Want more in depth ESOP implementation information?    Start here

 ESOP Best Practise

Stock ownership plans come in many forms in a wide variety of businesses and are regulated in different ways in different countries around the world. At ESOP World Forum you can discover how to make employee stock ownership work for you or your business.

Business Owners: If you are considering how to motivate and compensate your employees in the optimum way for your business then ESOP World Forum can help you get the full benefits and background on employee stock and share ownership plans.

Finance, HR or Stock Plan Administrators: If you are designing, implementing or administering a stock plan for your business you can find information to help you do this efficiently, effectively while in compliance with the relevant legal and tax legislation.

Employees: If you are an employee in a company with a stock ownership plan you can find out how to make the most out of your plan and discuss you options with like minded people in our forum.