There is an increasing trend for companies to use Employee Share Ownership Plans (ESOPs) to support staff retention and employee engagement. However, the administration of setting up and managing an ESOP can be burdensome for companies if they are using traditional manual processes like spreadsheets, and this also limits the engagement opportunities with staff.

Here are five reasons to move the management of an ESOP from a spreadsheet to an online platform in order to maximise benefits for both the company and for employees.

1. Improve Visibility and Understanding

ESOPs (Employee Share Ownership Plans) or ESS (Employee Share Schemes) can be complex to understand if company management and staff aren’t already familiar with them. Whilst ESOPs are becoming more prevalent in New Zealand and Australia over recent years, many employees have not participated in one before, and they may not have a comprehensive understanding of how their ESOP works.

In a lot of cases, a company’s ESOP information will sit on the CEO or CFO’s desktop in an excel spreadsheet, meaning that employees do not have any visibility or access to their details and the overall ESOP scheme. If they are new to ESOPs, they may be hesitant to ask questions and take up the CFO or CEO’s time, meaning that they could become disengaged with the scheme, or even worse, sceptical of any real benefit from being an ESOP participant.

By moving ESOP management to an online platform, companies can grant participating employees access to their ESOP details with the click of a button. Staff are able to login and track vesting events, view and download key documents and receive communications from the company.

Having your ESOP on an online platform will help your employees to familiarise themselves with the way their ESOP operates, and better visualise and understand the mechanics of how it works.

2. Maximise ongoing staff engagement in the ESOP

One of the main reasons a company will offer an ESOP programme as an employee benefit is to align company goals with individual ones, and to encourage an ongoing ownership mentality in staff. To do this, it is vital for an employee to be aware that their ESOP allocation can be more valuable as the company grows and that their ongoing contribution is critical to the company’s success and potential reward for everyone involved in the ESOP.

Education plays an important role in ensuring employees fully comprehend the benefits of an ESOP, but once that understanding has been established, the company needs to consistently keep their employees engaged in their ESOP.

By using an online platform which can create regular ESOP communications for staff, and send them updates on milestones such as when their options vest, companies can keep ESOP awareness high, making it more effective as a motivational tool.

3: Move online and save hours in ESOP administration

In many cases, a company’s physical ESOP documents such as grant letters, exercise notices and Director’s certificates are in the hands of a single individual such as the CEO, CFO or HR Manager. It is their responsibility to maintain and keep record of these and the various legal documents which are required to manage an ESOP scheme. The risk of having such an approach is that often paper records can be lost or misplaced, meaning that the company could find itself non-compliant.

Additionally, the effort involved in printing documents, having them physically signed, scanned, returned and subsequently stored is a time consuming and manual process. Moving ESOP administration online means that companies can grant multiple individuals access to the plan and the necessary documents. They can streamline and remove the paper-based document flows by incorporating electronic signing together with online document storage and sharing, resulting in a large amount of savings for both administrators and staff.

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4. Move to software before the ESOP grows unmanageable

In many cases, an ESOP will start off small by being offered to a handful of select employees or in the early stages of a company starting up. But as the company grows and more staff are added to the ESOP, the administration effort involved in maintaining accurate data can easily grow exponentially.

For example, when an ESOP is first created and implemented it may be offered to a few founding employees, who are set-up on the same 6-monthly vesting schedule. But if you fast forward 12-18 months, ESOP grants could easily have been given to an additional 15-20 employees, all of whom were issued ESOP at different times and with different vesting schedules. Companies may even have an employee's vesting schedule tied in with KPIs or performance objectives. It quickly becomes significantly more complicated and harder to keep track of.

By moving to ESOP software, you can set up automatic vesting schedules, allowing the administrator of the ESOP to spend less time in front of a spreadsheet, manually calculating and tracking details. Additionally, in the event an employee wishes to exercise some or all of their vested options, the company’s internal ESOP administrator will need to amend their ESOP spreadsheet and manually generate the paperwork to issue shares to the employee. By using an online platform, these calculations and actions can be set-up to occur automatically, reducing the growing admin burden.

5. The ESOP is synced with your company share register in real time

In the early days of an ESOP, there may not be a need to regularly update your company’s share register based on ESOP events. However, as the ESOP develops and more employees are having their share options vest and subsequently exercised, it is essential for compliance to ensure that that company’s share register is updated accordingly.

Having an up to date share register is the legal obligation of a company in many countries. If employees are exercising their share options at regular intervals, the task of manually updating an ESOP spreadsheet, the company share register and then the relevant regulatory body (for example, ASIC in Australia or the Companies Office in New Zealand) can be difficult to keep on top of.

Using online software such as Orchestra for ESOP management, a company can bring all equity related components together into one system giving time savings and peace of mind for the managers and ensuring compliance for the company.


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ESOPs: a comprehensive guide to Employee Share Ownership Plans updated for 2021

Using call options for your ESOP

DISCLAIMER: This article is for informational purposes only, and contains general information only. Orchestra is not, by means of this information, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your business or interests. Before making any decision or taking any action that may affect your business or interests, you should consult a qualified professional advisor. This information is not intended as a recommendation, offer or solicitation for the purchase or sale of any options or shares.