GEO INSIGHTS

Despite economic pressures from rising interest rates and inflation, participation in salary sacrifice employee share plans has remained strong, as revealed by a Computershare analysis across ANZ clients. Key factors driving this resilience include the simplicity of automatic salary deductions, tax benefits, and employer matching contributions, which together make these plans appealing long-term investments. For employers, the sustained popularity of these plans highlights their value as a tool for boosting engagement, fostering a sense of ownership, and enhancing employee compensation packages to attract and retain talent.

The 2024 UK Autumn Budget introduced higher Capital Gains Tax (CGT) rates and employer National Insurance contributions (NICs), raising questions about the continued effectiveness of employee share plans. Despite these changes, share plans remain valuable due to their tax advantages, such as lower CGT rates compared to income tax and corporation tax relief for employers, as well as their ability to align employee and company interests. While the tax landscape has shifted, share plans continue to offer long-term benefits for both employees and employers, emphasizing the importance of strategic structuring and clear communication to maximize their impact.

Capgemini's eleventh employee shareholding plan attracted over 55,000 participants from 32 countries, reflecting strong employee trust in the company's strategy. The plan involved a €415 million capital increase through the subscription of 2.7 million shares at a discounted price, maintaining employee ownership at around 8% of the Group’s capital. To prevent shareholder dilution, Capgemini repurchased and canceled an equivalent number of shares for €474 million, ensuring alignment with its long-term strategic goals.

The 2023–24 CEO & Senior Executive Compensation Report for Private Companies reveals that CEO base salaries saw modest growth of 4.1% in 2023, with similar trends expected in 2024, while bonuses increased significantly, contributing to a nearly 10% rise in total cash compensation. Senior executives experienced smaller salary increases, averaging 3.5%, but benefited from a 30% rise in performance-based incentives in 2023, with median total compensation reaching $239,000 excluding presidents. Middle managers and front-line workers saw the largest salary increases of 4.2% in 2023, driven by talent competition, though 2024 pay raises across all levels are projected to remain modest, influenced by factors like company size, growth, and profitability.

AnalytixInsight announced the grant of 1.6 million restricted share units (RSUs) and 1.05 million stock options to strengthen its advisory team, including strategic appointments such as John Ballow, Valisha Graves, and Richard Greco. The company aims to enhance its CapitalCube product, expand enterprise sales, and explore new opportunities for its MarketWall fintech solutions, leveraging the advisors' expertise and networks. Additionally, AnalytixInsight plans to settle C$117,500 in accrued fees to directors and officers through the issuance of 11.75 million shares, subject to regulatory approval, as part of its broader strategic initiatives.

The Czech Republic will end the unlimited tax exemption for securities sales after 30 years, capping annual exempt income at CZK 40 million starting January 1, 2025. To address concerns about retroactivity, taxpayers can use the market price of securities as of December 31, 2024, for future sales, requiring accurate valuation, particularly for non-traded securities. While this marks a significant shift in the Czech tax regime, the burden of proof lies with taxpayers, and the changes bring new complexities, including potential disputes over compliance and interpretations.

A parliamentary proposal in the Czech Republic aims to amend the Income Tax Act, allowing employers to revert to pre-2024 taxation methods for employee share and stock option plans. This would simplify administration and resolve complexities caused by 2024 changes, such as postponed taxation timing, double taxation risks, and social security contribution delays. If adopted, the amendment, effective January 2025, would permit employers to choose tax deferral by notifying tax authorities, easing compliance for global share schemes and benefiting employers and employees alike.

A proposed amendment to the Czech Income Tax Act aims to allow employers to revert to the pre-2024 method of taxing employee share and stock option income, simplifying administration and addressing issues like double taxation. Employers can opt for tax deferral by notifying the tax authority by the 20th of the month following the employee's acquisition of shares or options; otherwise, income will be taxed immediately, as was the case before 2024. For 2024, retroactive tax deferral is possible if employers notify the tax authority within two months of the amendment's effective date, with no penalties for late tax payments.

Swiggy's IPO, valued at ₹11,300 crore, has unlocked ₹9,000 crore worth of employee stock options (ESOPs), creating significant wealth for around 5,000 employees, with nearly 500 becoming 'crorepatis.' Employees can sell their shares a month after listing, thanks to a regulatory exemption, while the IPO was oversubscribed 3.59 times, driven by institutional investors. With its ESOP program spanning three plans since 2015, Swiggy's founders and top management collectively hold ESOPs worth ₹2,600 crore, emphasizing the company's commitment to rewarding employee contributions.