For employees, one of the bigger attractions of working for a startup is equity and the chance to benefit from the company’s success. Employers can (and often do) include this as part of a comprehensive benefits package.
But when a team spans multiple countries with different rules and laws to comply with, it’s important to understand how to offer this to all employees.
“Providing equity compensation to your team members is the best way to attract the best talent,” says Valentin Haarscher, general manager of Easop, part of global HR platform Remote since its acquisition in April 2024. “People who come to work for startups want to be involved in every aspect of the business, and they want to feel part of something big. There really is no better way to encourage that sense of ownership than by actually making it possible to earn an ownership right in the company.”
Here are the considerations that must be made when giving equity to employees, no matter where in the world they are.
Legal considerations
It’s important to consider the legalities of offering equity across multiple countries before committing to it as part of a compensation package. Naël El Berkani, senior legal manager at Easop, says founders must look at tax implications, documentation, compliance with local rules and employee education.
Compliance is unfortunately not a one-off exercise.
El Berkani says the tax treatment of equity compensation varies widely between countries, but there are four main parameters that employers have to take into account:
- What is it that you’re calling equity?
- What type of team member are you granting equity to?
- Where does your team member have their tax residence?
- What is the value of your equity?
“You need to think about these parameters before granting equity,” El Berkani tells Sifted. “If you don’t, some of your risks include giving your team members a ‘poisonous gift’ because they would need to pay taxes on illiquid shares, or expose the company to fines because of a missed tax deadline or wrong assessment of the withholding amount owed to the tax authorities.”
Proper documentation includes obtaining necessary board and stockholder approvals, and ensuring that all terms and conditions are clearly outlined in the corporate approvals and in the award documentation.
Every grant of equity typically requires a decision from the board, or a committee or delegate if the delegation has been specifically allowed in the equity plan.
It’s essential to be mindful of compliance with local law too. Employment laws can force startups to adapt their standard forms — for instance, by forcing them to adapt the definitions of good and bad leaver clauses.
Tax laws can sometimes be used to take advantage of equity schemes that will benefit employees, like Enterprise Management Incentives (EMIs) or the Company Share Option Plan (CSOP) in the UK or Bons de souscription de parts de créateur d’entreprise (BSPCE) in France.
“Compliance is unfortunately not a one-off exercise,” says El Berkani. “Startups need to continuously monitor and comply with legal and regulatory changes that may affect their equity compensation plans.”
Across all borders
Haarscher says the biggest challenge of giving equity to employees in multiple countries is that every country has its own set of rules — founders can’t assume what works in the US will work in France, for example.
Startups need to continuously monitor and comply with legal and regulatory changes that may affect their equity compensation plans.
“You suddenly have to become an expert in international equity laws, which almost always leaves you with no choice aside from hiring lawyers to draft and grant equity that complies with local laws,” says Haarscher. “Lawyers are expensive, but when you add cross-border considerations into the mix, things become more complicated. Most lawyers are experts in a single district or country — they can’t help with your needs overseas.”
Haarscher says Easop was formed with the mandate to drastically simplify the process of cross-border equity compensation and grant equity in minutes that complies with local laws — and with the acquisition, Easop is able to integrate those services into Remote’s HR platform and drive activity from one central hub.
By automating equity compensation compliance for companies globally, it alleviates concerns about abiding by local laws, too.
“Having a system that allows a company to draft stock option grants that comply with local laws is a way for teams to not only save time, but also the money that would go toward legal teams in different worldwide locations,” says Haarscher.
Differing approaches
Let’s look at an example. A startup in the US might have some local employees, a few team members in the UK via a local subsidiary, employees in France via an Employer of Record (EoR), and contractors in India. A founder would need to consider what type of equity incentive makes the most sense for this remote team.
By providing equitable and compliant equity packages, companies can attract and retain the best people.
El Berkani says if you’re an early-stage company, EMI makes the most sense for UK employees in this scenario — but it comes with some requirements, such as the filing of an annual report to notify the UK tax authorities (HMRC) of certain events in the EMI lifecycle like grants and exercises.
“In France, there’s a scheme similar to EMI called BSPCE, for which there are less formalities and requirements,” says El Berkani. “[However], it is not available for EoR employees. You’ll have to find an alternative and understand when the employees will be taxed and who is responsible for withholding.”
In India, granting stock options as a foreign company is not as easy as it is in Europe — startups would need to look for alternatives such as virtual stock options or stock appreciation rights settled in cash for these employees.
“It’s important for companies to recognise that offering equity to employees is not just about compensation — it’s about creating a culture of ownership and shared success,” concludes Haarscheer.
“By providing equitable and compliant equity packages, companies can attract and retain the best people, drive ongoing engagement and ultimately achieve long-term success.”
Read the orginal article: https://sifted.eu/articles/employee-equity-multiple-countries-brnd/
