Equity incentive design and implementation

Challenges for employers

With the competitive environment, talent attraction and retention is a top priority for all businesses. Demographic shifts, changes in performance management, better use of technology, and a complex regulatory environment are making new demands on reward structures and strategies. Employees and senior executives are sensitive to market trends and industry data for the remuneration strategy.

To design and launch a ‘fit for purpose’ employee equity plan that aligns with the company’s corporate cultures, business plans, reward strategy and cost management has been in demand for years. Since 2002, PwC has been continuously conducting its annual global survey on equity incentive plans, and the information collected has become a cornerstone of our data base.

A key way to drive success for many pre-IPO companies is facilitating shared ownership via employee equity incentive schemes. The incentive plan requires careful design, communication and ongoing management to deliver the desired alignment and impact, as well as the tax, accounting and legal consequences. Our experts support clients in creating new schemes, increasing their tax efficiency, managing cost and navigating the impact of organisational change on any type of employee equity arrangement.

Whether the introduction of equity incentive plan matches the strategic planning of the enterprise, especially the path of IPO planning;
Whether the current situation of human resources and management can support the introduction of equity incentive;
The impact on the cash flow and finance of the company;
The implementation of incentive programs, especially the tax impact, and evaluation of the effectiveness of incentive on its targets.

Equity incentive design and implementation

Our equity incentive design experts work with clients using technology based platforms and our market experience to determine employees' preferences, expectations, and identify value gaps. We help our clients to design bespoke surveys based on their specific goals, perspective and constraints, interpret results, provide technology tools, extract actionable insights, and develop and implement action plans.

Tax and foreign exchange administration implementation

In China, employers are required to register equity inventive plans with their local tax bureau. In addition, employers are required to comply with the State Administration of Foreign Exchange ("SAFE") registration when their Chinese employees participate companies' oversea equity incentive plan.

Tax registration requirements:

Stock options, virtual shares, stock appreciation rights, restricted shares/units and performance stocks/units shall be registered with local tax authorities

Additional foreign exchange registration requirements:

The overseas listed companies shall register with relevant State Administration of Foreign Exchange offices for Chinese employees who participate the equity incentive plan.

PwC can assist with our clients in the following aspects：

Assist with tax registration and SAFE registration procedures;

Help with application assembly and provide with related consultation services;
Coordinate with authorities on detailed compliance requirements and reporting procedures;
Facilitate with appropriate employee communication;
Provide ad hoc services with solutions.