ESOP management – how to save time

February 12, 2020 |



 

Employee share ownership plans (or ESOPs) are having a good decade. Time and time again, they have been shown to add value to companies in nearly every possible way – they make recruitment and retention much stronger, they make employees feel more invested in the company’s success (to the point where they even take fewer sick days) and they are a tax-efficient, bottom line-friendly offering for companies.

It’s only natural that you see these headlines and want to jump right into launching a plan yourself. But starting an ESOP takes a lot of planning and coordination in order to be successful. And that planning and coordination is only the beginning – effectively managing an ESOP day-to-day takes a lot of time and hard work.

Of course, the best way to save valuable time and resources in managing your ESOP is to have somebody else do it. Equity compensation software is a good start, but what you really need is a dedicated support team to help with administration, participant visibility, reporting, etc. But if you’re determined to do it alone – you and your spreadsheet or software against the world – we’ve come up with some tips to help you save time.

 

If you build it, they will come

Like companies, most ESOPs start small. At the beginning, it’s hard to imagine just how big they can get. But just like companies, if an ESOP is managed correctly – it will grow. Exponentially.

With more participants, comes more administration. Much more administration – more employee data, more awards, more vesting, more transactions, and so on. You can’t cut corners at the beginning. With every feature you implement for a small plan, you need to ask yourself if it works with a plan that’s 20 times larger. And then 20 times larger than that.

This doesn’t necessarily save you time at the beginning. But trust us – it will save you from a whirlpool of wasted time and resources further down the line. Which goes into the next point…

 

Make the paperwork work for you

Not the other way around.

When your participants sign into their share plan portals, they can see all the relevant information about their shares and awards in their portals. What they don’t see is all the documentation clutter. There’s a reason for this; behind every share certificate, or transaction – even simply activating their account – there is a nearly endless trail of documents. Your participants don’t need to see all of it.

However, you need to be able to see all of it. Managing an ESOP is essentially managing an ever-growing, increasingly complex pile of paperwork. When it comes time for your employees to declare tax, or for your company’s annual reporting – or the hundreds of other times you’ll need more information on something – you need to be able to access all of these documents quickly and efficiently. Otherwise, anytime you need any reporting, you’ll need to double or triple the normal amount of resources dedicated to it – just to get it done.

From the start, you need to be collecting and storing your employee data in an efficient manner. For example, our BI Reporting tool allows us to quickly and easily identify populations within participants for our clients, and provide them with the reports they need, when they ask. No matter how large our clients grow, or how complicated their plans become – our teams have them covered.

 

Keep your employees engaged

This is a major step that many plan administrators seem to forget about. Or at least, they only remember to do it when a new plan is being launched. But in order to make your life easier, and keep your ESOP management as efficient as possible, you need to keep your employees engaged.

It’s the difference between heating up a kettle full of cold water, and one that's already hot. If you only engage your employees when you’re launching or ending a plan – there are going to be gaps of at least a year, if not three or five years, between engagements. You’re essentially starting over from scratch. Whereas if you keep them engaged with regular updates, quarterly meetings, plan newsletters, or something along these lines, then you keep them focused and aware of the plan’s lifecycle and benefits. Instead of having to run a massive campaign, you can provide quick and concise updates.

Why do you need to keep employees engaged? You need to make sure they’re updating their account information regularly, as well as keeping an eye on important dates like vesting. This saves you from pulling down your reports, only to have to re-do them after half the company updates their accounts at the same time. And many of the participants might not know much about shares or finances – if you don’t keep the terms and knowledge in their head, your inbox could get flooded with questions when an important event comes up.

 

 

There are many more ways to keep your ESOP management efficient. (If you want to see another post with more ideas about how to keep your plan efficient, comment below.) But the underlying idea behind all of them is to get it right from the start – and that continuous maintenance will save you time in the long run.

If you don’t have a specialist on your team who can handle this – and make sure you keep up to date on new regulations – don’t worry. At Global Shares, we have an award-winning combination of equity compensation software and administrative support. We make sure we have a dedicated team for each client, to keep the plan running smoothly – now, and for the future. Contact us today.

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