August 28, 2023

Streamlining ESOP Administration

Streamlining ESOP Administration: A new era of flexibility, efficiency and liquidity

Employee ownership schemes (ESOPs and employee share schemes) have witnessed a significant evolution in recent years, providing businesses with the ability to offer ownership to their employees via different structures such as loan schemes, lock-in schemes and optional bonus-to-shares. This has afforded greater flexibility to businesses but at a cost - the administrative tasks rise as the complexity of the plan increase. These schemes can quickly become time-consuming, requiring a sophisticated solution to ensure smooth operations. There are benefits of adopting a comprehensive ESOP administration platform, enabling businesses to scale up their plans confidently while minimising administrative burdens, as well as the impact of adding a liquidity mechanism.

Simplifying Administration:

ESOP and ESS programs have traditionally been managed using manual processes, often relying on spreadsheets that are prone to errors and key-man risks. However, with a sophisticated ESOP/ESS management solution, businesses can streamline their administration and reduce the burden on HR and finance teams. Our experience is that although clients came to us for the liquidity component (periodic market) the teams found that the platform’s registry management was an unexpected surprise. Time is saved, risks are eliminated and the transparency and structure gained in the plan is highly revered.

An example of where these admin savings come from is in their interim and final dividend payments. These can be an arduous process that includes spreadsheet organisation, calculations, IRD website uploads and statements formulated in Word. Syndex software can take care of the process with automated distribution payments and IRD uploads, document storage and employee notifications.

Enhancing flexibility and liquidity:

One of the stand-out features of our ESOP administration platform is the ability to offer employees greater flexibility in their plans. This empowers them to manage their ownership stakes according to their personal financial goals and circumstances, fostering a sense of ownership and engagement.

A differentiator for Syndex in ESOP/ESS management and administration is the inclusion of liquidity options. Our clients that utilise the periodic market know that their employees are really seeing their shares as tangible financial assets. By promoting liquid shares into employee ownership schemes, the purpose of such schemes/plans, such as attracting top talent, boosting employee retention, and aligning the workforce's interests with the company's success, are further realised.

The periodic market is a real-time trading event. The closed event invites shareholders/employees to attend and engage in buying and selling their shares in a fully transparent and fair setting. Price discovery is achieved through the carefully-tuned algorithm that takes all bids and offers and declares the optimum selling price. In the case of a departing employee, they have an opportunity to exit, or cash out, at a transparent and fair price. No longer are the finance team emailing company members asking who wants more shares.

The Syndex platform is used for all stages of the auction from the set-up, pre-auction and open, through to the blind close, matching and settlement. With easy parameters to set, the platform offers automation and quick programming.

The final touches include sending settlement instructions, generating reports, executing trades in the register and participants seeing their updated holdings in their portal. This concludes a seamless and admin-easy process that enhances liquidity in a fair and transparent way.

As employee ownership schemes evolve, businesses will benefit from embracing modern ESOP administration platforms to manage their plans effectively. By leveraging such platforms, organisations can offer employers flexibility, but it’s with the Syndex liquidity offering that employees really start to benefit.  

The transparency, structure, and automation provided by these solutions empower businesses to scale up their employee ownership programs confidently, attract and retain top talent, and foster a culture of ownership throughout the organisation. So, untangle your employee plans now and embrace the new era of ESOP administration.

Ross Verry

Ross Verry is CEO of Syndex and a shareholder. The views expressed above are purely his own. Please assess and research all your investment.

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