ShareReporter attended one of the most important events in the global equity sector recently. The Global Equity Organization is the world’s leading body for professionals working in the field of international share plans, and their Pan European Regional Event brought together industry experts from throughout Europe and beyond. ShareReporter’s CEO, Mike Pewton, spoke on the topic of “When is an employee not an employee?” in a panel alongside Sarah McMaster, a global equity expert from CMS’s Employee Incentives Team and Philip Newbald, Director of Finance Operations and equity product lead from OysterHR (a client and platform partner of ShareReporter). This panel looked at issues around granting equity globally to individuals employed via global employment platforms like Oyster, often called Employers of Record (EORs).
The panel addressed some of the key issues facing companies with global share plans. As well as ensuring the company’s documentation permitted the grant of equity awards to these types of employees, the legal and tax implications of granting were discussed.
Where participants are employed through an external organisation such as an EOR, then the companies need to know when taxes will arise, how taxes relating to the equity awards are paid and which entity will be responsible for any withholding and reporting obligations. Many jurisdictions will expect the EOR to withhold taxes in the same way on equity awards they do when withholding income taxes through the payroll. The participant will then usually be responsible for any capital gains that arise when selling the shares, and it is important that participants are kept informed about the taxes.
Other issues include ensuring that the documentation and communications between the company, the EOR and the participant were appropriate.
The panel was realistic about the overall compliance situation in this rapidly growing sector. The experts all agreed that there were many jurisdictions that had yet to incorporate this specific method of employment into their tax rules, and therefore that companies with distributed workers need to get some legal advice where necessary. In most cases, though, if the EOR withholds taxes then this is likely to be acceptable to (if not a requirement of) the tax authorities. This approach is very much embraced by Oyster, which, in partnership with ShareReporter, is looking to help its client companies handle equity for its team members.
It was great to see this important and growing employment trend examined in detail at such an important equity occasion, attended by numerous global companies. We expect more and more businesses to employ global teams in this way, and it will be interesting to track changes in equity compliance as jurisdictions make tax rules for the distributed workforce.