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Employee Services Update - September 2016

Mon 12 Sep 2016

A roundup of what’s happening in Employee Services

Award-winning EQ Strata

Equiniti’s new EQ Strata app helps to engage employees and widen the reach of communications through the use of Augmented Reality (AR). Collaboration with Equiniti in the use of AR via the EQ Strata app helped DS Smith win the Most Creative Solution Award at the 2016 Global Equity Organization Awards.

Hallmark Of Innovation Logo 2

Following on from this success for EQ Strata, we are really pleased that Equiniti has been shortlisted as a finalist in the ‘Innovation in Marketing and Communications’ category of the Financial Innovation Awards. Winners will be revealed on 8 December 2016 at an awards ceremony in London.

Jade Jordan-James from Equiniti Creative said:

We are excited to be a finalist for these awards and very proud that EQ Strata is being showcased as an innovative financial services communications tool, recognising our ground-breaking work and creativity in this area.

Find out more about how Equiniti is using AR to help companies boost employee engagement.

European Federation of Employee Share Ownership (EFES)

The EFES’s objective is to act as the umbrella organisation promoting employee share ownership and participation in Europe. Along with representatives from Belgium, Czechia, Denmark, France, Germany, Italy, Poland and Spain, Phil Ainsley, Managing Director, Employee Services has been voted onto the EFES Board for the 2016-2020 term. With all the changes that will happen over the next four years, this will be an exciting time to be more closely involved with this organisation.

The EFES’s tenth meeting was held in Brussels in May and Phil was invited to join a roundtable discussion, exploring what companies would like to see happen in Europe to help encourage employee share plan ownership. In advance of that meeting, we asked our clients for their thoughts on some key topics and a summary is below.

A number of UK companies with broad-based employee share plans extend these to their European employees (e.g. International Sharesave plans). However, on average take-up is lower amongst European employees compared with UK employees. Reasons put forward for this included:

  • Variance on tax treatment of share plans and a lack of tax/social security advantages for share plans in some countries
  • Lack of understanding of share plans and benefits amongst employees
  • Lack of understanding about holding shares in a UK listed company and dealing with sterling
  • General concerns about affordability where savings are required

Not all companies extend their plans into Europe due to: difficulties with differing tax treatments, meaning the plans do not provide an equivalent benefit; the cost associated with smaller groups of employees in different locations; and difficulties with administration, including gathering data (varying data protection rules), and general legal and regulatory red tape.

Suggestions put forward as to what the European Commission could do to help encourage Europe-based employees to participate in share plans included:

  • Promoting employee share ownership as part of wealth creation for employees
  • Encouraging countries to provide tax incentives to participate in employee share plans and continue to be shareholders (e.g. more generous capital taxes and dividend taxes treatments)
  • Simplifying the set up and running of share plans for companies and joining for employees

EU Market Abuse Regulation (MAR)

MAR came into force in the UK on 3 July 2016 bringing changes to regulations governing disclosure of information, insider lists, PDMR dealings, closed periods and market soundings amongst other items.

ICSA, the GC100 and the QCA have issued a guidance note on MAR. This Dealing Code and Policy Document has a specimen dealing policy, dealing code and procedures. This has been submitted to the Financial Conduct Authority and the London Stock Exchange and may be revised following any feedback from them. The Dealing Code and Policy Document is available via the ICSA website (a member login is required).

Discretionary Share Plan Structure

Our specialist Equiniti Premier Services IT and project team ensures we have systems in place as share plan design changes. Recent changes delivered include an online award acceptance process, enhancements to viewing cash plan information and pre and post vesting holding period management.

Improving long-term alignment between shareholders and executives has led to share plan changes encompassing holding periods, clawback and malus provisions. Linked to malus and clawback, we have developed discretionary plan adjustment capability and audit tracking. This includes capability to ‘freeze’ an award then adjust it and keeping a full reportable audit trail history. 

In addition, the audit trail functionality has the ability to record any clawback against the original award. Our Global Nominee has been developed to enable released shares to be held with restrictions on dealing. This enables holding period requirements under the share plan to be reflected and carried over to terms and conditions governing the Global Nominee service.

The Executive Remuneration Working Group, the independent group established by the Investment Association, has published its final report on executive remuneration structuring.

A key recommendation is for companies to consider whether a standard Long Term Incentive Plan model remains appropriate for their business. As many companies have to renew their remuneration policies next year, a key question will be whether to go along with the Working Group's recommendations.

HMRC National Insurance Contribution (NIC) Elections Consultation

Earlier this year, HMRC issued a consultation on Employee Share Schemes: NIC elections to gather views on whether companies with non-tax advantaged share schemes require the continued availability of a NIC election.

HMRC is currently analysing the feedback that it has received.