As part of a global benefits strategy, international organisations often want to expand their share plans to cover employees who are based overseas. Often, this is crucial to attract and retain key talent internationally and to achieve parity in remuneration packages across the global workforce.
However, granting employees equity is a complex area, giving rise to a number of local legal issues. Each must be carefully considered as early as possible in order to avoid problems leading to costly errors for the employer and disappointment for the employee.
Tax can make or break an employee share plan and its ability to provide a meaningful incentive for employees. In each jurisdiction, an organisation should take professional advice as to the tax implications of making equity awards, including whether there are any tax-planning opportunities available in that country.
Other important considerations are whether the organisation or local employer has tax and/or social security withholding obligations, and whether there are any particular filing or reporting obligations.
Employment and securities laws will vary from country to country, and should be investigated prior to expansion. The former includes issues such as whether works council or union consent is required, or whether the terms of the plan are likely to breach any discrimination laws; a common issue being how the treatment of retirees interacts with age discrimination laws.
Securities laws can make operation of the plan difficult if not dealt with properly, and breach can lead to fines and even criminal sanctions. Key considerations include whether any consents are required to launch the plan, what communications can be made to employees, and whether any filings with the local securities authorities are necessary.
The issues above are by no means an exhaustive list, so it is vital employers liaise with their professional advisors as early as possible in the proposed expansion process. Establishing a budget at the outset of the project, with a suitable buffer to deal with unexpected expenditure, can help control costs. Expanding into one country at a time may help keep things manageable, although it might increase costs overall if the project has multiple stops and starts.
Dan Sharman is an associate at international law firm Bird and Bird