Startup equity guide: How to add incentives to your global benefits package

As a startup, benefits are an invaluable way to attract and retain top talent, especially if your salary budget is restricted. And one of the most in-demand benefits is equity incentives, such as stock options.

If you have team members in different locations (and even if you don’t), offering and managing a stock option plan may sound complex and time-consuming. But, with the right guidance and support, it doesn’t have to be.

In this article, we’ll look at how your startup can viably — and fairly — offer equity incentives to your people, wherever they are based. We’ll also explain how you can address the numerous legal and tax considerations, communicate the benefit clearly, and save yourself time, resources, and money.

Offering incentives as a startup

For companies of any size, equity incentives require a formal plan. There are numerous types of incentives you can offer, but many businesses opt for an employee stock option plan (ESOP).

ESOPs provide your employees with ownership stake in your company, which can help you:

• Attract and retain top talent

• Motivate your employees

• Boost productivity and engagement

• Promote a sense of ownership and shared success within your startup

They are also versatile, and can be tailored to your company's needs. Typically, employees are able to exercise their stock options once they have been at your company for a prolonged period (known as the vesting schedule), but exercising can also be dependent upon performance-based criteria. This promotes loyalty, and is more likely to encourage people to stay with you.

Depending on the type of stock option being offered, ESOPs can also offer significant tax benefits for both your company and your employees. ESOP contributions are often tax-deductible, and the sale of ESOP shares by employees is generally taxed at capital gains rates, which are lower than ordinary income tax rates. As a result, ESOPs can provide your people with a tax-advantaged way to save for retirement, or for other financial goals.

That said, an ESOP might not fit every company's profile. To learn more about the various types of equity incentives you can provide, check out our in-depth guide.

What are the main legal and tax considerations?

As mentioned, offering equity incentives brings a unique set of legal and tax complexities across multiple jurisdictions. Each country typically has its own set of laws and regulations governing ESOPs and other equity incentive schemes, and being able to navigate these is key.

For example, in the UK, Ireland, Portugal, and Switzerland, you (as the employer) have to report the employee’s tax obligations starting from grant. Missing a deadline can quickly lead to fines. You also need to be aware of taxable events, and your employees will expect you to have intimate knowledge of their country’s equity incentive-related tax laws.

Of course, for many startups, having this level of knowledge is impractical, and finding and hiring local third parties who do is costly and time-consuming.

That’s why it’s highly recommended to work with a reliable, experienced partner who can handle everything for you. Remote, for instance, handles all the tax, regulatory, and compliance requirements of your equity incentives plan in different countries, ensuring that borders are not a barrier to you being competitive.

Communicating your equity incentives

One of the most overlooked aspects of offering equity incentives is communicating how they work — and how valuable they can be for your people. To put it simply, your employees won’t be incentivized if they don’t understand what they’re getting.

Therefore, you also need to focus on educating your team members. As an example, here are some key strategies for effective communication when offering an ESOP:

Create a comprehensive plan

Develop a detailed communication strategy that outlines the key messages, communication channels, and timeline for rolling out your ESOP. This should include information about the ESOP's structure, benefits, vesting schedule, and any tax implications. It should also address how employees can access and manage their ESOP accounts.

Top tip: Remote Equity’s grantee portal centralizes communication about every element of your equity program. Employees can understand what their equity means, when it will be granted, what it means for taxes in their country, and more.

Benefits & Leave —

15 min

How to offer stock options to foreign employees

Learn how to quickly, easily, and compliantly offer stock options to a global workforce with our detailed, expert-led guide.

Establish transparent communication channels

Establish regular communication channels to keep employees informed about the ESOP and any updates or changes. This can be done through company-wide meetings, emails, newsletters, or a dedicated ESOP portal. Encourage open dialogue and feedback from employees to address any concerns or questions they may have.

Translate the documents and communications into your team members’ languages

To make sure everyone's on the same page with the ESOP, it's a smart move to translate key documents and messages into the languages your team members speak at home. This includes the ESOP plan document, FAQs, and any educational materials. By doing so, you're promoting inclusivity and ensuring everybody can understand the terms of the plan.

Encourage open dialogue and feedback from your employees

Cultivate an environment where your team feels at ease asking questions, seeking clarity, and offering feedback on the ESOP. Regularly tap into employee input to grasp their concerns and make the essential tweaks to the program.

By putting these effective communication strategies in place, you can ensure that all your employees — no matter where they are — can fully participate in the program. This not only boosts employee engagement and satisfaction, but adds to the overall success of the ESOP and your company as a whole.

Case study: Cycle

Although based in the US, Cycle — an AI-powered feedback management platform — has a distributed team in France and Belgium. To effectively manage its ESOP plan across multiple countries, it partnered with Remote Equity (formerly Easop).

By leveraging Remote Equity’s expertise, Cycle is able to ensure compliance with local regulations and tax laws in every jurisdiction where it operates, without getting bogged down in the complexities. As a result, Cycle is more easily able to foster a sense of ownership among its workforce, as well as alignment with the company’s vision.

This shared ownership has helped to create a culture of innovation, collaboration, and high performance. And, by recognizing and rewarding their employees with ESOPs, Cycle has been able to drive their growth and success in the competitive AI industry.

Cycle’s story is a powerful example of how equity incentives, such as ESOPs, can be leveraged to great effect on a global scale — simply by adopting the right tools and strategies.

How to manage equity incentives as a startup

To successfully manage equity incentives for your global team with limited resources, here are some best practices to follow.

Establish clear vesting schedules

If you’re going to offer a stock option plan, implementing a clearly-defined vesting schedule is crucial. It should outline the conditions and timelines for your employees to earn and retain ownership of their stock options or shares, and leave no room for confusion.

Consider factors like years of service, performance milestones, and company growth targets when setting vesting schedules.

Foster a culture of ownership and engagement

Equity incentives are a great way to help cultivate a culture of ownership and engagement, but not by themselves. Ensure that you encourage your team to take ownership of their stake and to be active contributors to the company's advancement.

Introduce other programs and practices that foster a sense of community, like regular town hall meetings, employee commendation initiatives, and avenues for staff to partake in decision-making. By nurturing a culture of ownership, you'll inspire your team, solidify their dedication, and bolster your startup's overall performance.

What about independent contractors?

If your company works (or plans to work) with independent contractors, it’s possible to involve them in your equity incentives program. There are usually caveats to this, and such instances would likely need to be reviewed on a case-by-case basis, but it is possible.

This can be especially useful for startups, allowing you to increase your contractors’ loyalty, create a more invested workforce, and — crucially — help enable you to attract high-quality advisers and consultants.

Contractor Management —

14 min

How to offer stock options to independent contractors

Understand when you can offer stock options to an independent contractor, and discover how to offer them compliantly with our expert guide.

How Remote can help

Being able to offer equity incentives as part of your wider compensation package can be a massive differentiator, and help you attract and retain the best talent. This, in turn, can be a massive growth driver for your business.

However, we understand that, as a startup, your time, budget, and resources are already stretched precariously thin, and that taking on the management of a global equity incentive plan may not sound particularly appealing.

Remote Equity takes this burden off your plate, and ensures that you don’t need to worry about the associated tax and legal complexities. We can help you draft your stock options plan, outlining the rules, guidelines, and structure of your program.

Remote Equity also enables you to:

• Grant (and manage) equity to global employees and contractors in seconds (compared to an average of three months with legal firms)

• Remove the risk of costly fines and legal penalties, and ensure full compliance with local tax and documentation laws

• Save money and avoid costly third-party and manual processes

• Better educate your team members on the true value and implications of their stock options

To learn more about Remote Equity, and to find out how you can start offering stock options to your global team, speak to one of our friendly experts today.

Learn how to offer equity incentives to a global team

Unpack the complexities and compliance challenges, and see how you can easily offer stock options to your team members - wherever they're based.

Get your free guide