As companies continue to extend their reach around the globe, so does the practice of offering incentive arrangements to overseas employees.The design of a global incentive plan is the key to its success – it must be attractive to the employees, practical to manage and represent good value for the company’s shareholders.
Deloitte has a globally co-ordinated network of experienced professionals helping multi-national companies understand the rules, regulations and practices in each country and to effectively manage the compliance requirements of their global incentive plans.
Designing, implementing and communicating global incentive arrangements can be a complex and daunting task. Tax, legal, accounting, cultural, corporate governance and HR issues all need to be considered to ensure benefits to the company and the employees are maximised.
Compliance with tax requirements can also present challenges for companies operating global incentive plans, particularly in ensuring that these requirements are met on an ongoing basis. With ever changing legislation, rules and practice it can be hard for companies to keep up. With greater focus of tax authorities on increasing tax revenue, it is especially important for companies to get this right.
In addition, the operation of incentive plans globally is surrounded by significant regulatory complexities. Securities law, regulatory rules, exchange controls and employment law are just some of the issues that companies ought to consider for both the implementation of new incentive plans and the continued operation of existing plans.
Some of the areas where Deloitte can assist companies with their global incentive plans include:
Design and implementing new global incentive plans
Deloitte offers a comprehensive approach to the implementation of new incentive plans and can assist companies through the structuring, design, calibration and practical implementation stages in a cost-effective way.
Deloitte can assist companies by working with them to determine the company’s on-going responsibilities and highlighting legislative and regulatory changes to ensure that the company is compliant. Successful tax compliance is also dependent on the correct processing of incentive plan income by local payrolls and therefore our work can include assisting the company with reviewing payroll processes and compliance at the local country level.
We have a dedicated team of specialists who provide combined reviews from a tax and a regulatory perspective. Our integrated approach ensures that the related tax and regulatory points are linked up by one set of advisers, which means that the whole picture is clear in a single piece of advice. It also offers a single point of contact for the company and our combined approach should save time and costs when compared with separate tax and regulatory advice. At any one time we are typically undertaking a number of combined reviews for different clients, which keeps our knowledge up to date and gives our clients access to a huge amount of knowledge about what is happening in the global incentive plans market.
GlobalAdvantage Incentives manages multi-jurisdictional tax and social security withholding calculations on equity award transactions. The tool supports the majority of incentive plans, and provides automated calculations for over 100 countries. GlobalAdvantage Equity provides clients information on the legislative and practical challenges of implementing equity plans in over 50 key countries and is available free of charge to our clients.
Maximising tax efficiencies
Deloitte has the knowledge and expertise to advise companies on where they can obtain tax efficiencies in operating equity plans both in the UK and internationally. For example, we can make recommendations on minor changes to a company’s existing plans that could create tax savings for both the employer and employee. Deloitte can also assist with the preparation of a sub-plan which may be required to obtain tax efficient treatment in some countries.
Recharging costs incurred in global incentive plans
Deloitte has the capability and expertise to support companies in implementing recharge arrangements which can generate significant local corporate tax deductions in many overseas jurisdictions. We have a detailed understanding of both the tax and accounting implications of recharges and also the related regulatory issues. In addition, Deloitte are able to provide support at all stages of the process – from quantifying potential tax savings upfront, and technical analysis of the availability of a deduction in each jurisdiction to drafting appropriate recharge documentation.
With the complexities of operating incentive plans globally, the need for communicating the key messages to employees clearly and succinctly is fundamental to the success of the plan. Deloitte work closely with many companies to ensure that their employees understand the benefits and terms of each incentive plan through effective and clear communications.
Funding and accounting
From determining the IFRS2 expense and how this should be recognised in a company’s accounts, to modelling the costs involved with use of market purchased, treasury or newly issued shares for the settlement of awards under the company’s global incentive plans, Deloitte have both the knowledge and expertise to assist companies with the funding and accounting of global incentive plans.