Equity compensation—such as restricted stock units (RSUs), stock options (ISOs and NQSOs), and employee stock purchase plans—has become increasingly common, offering employees potential wealth-building opportunities but also creating complex tax considerations. Understanding vesting schedules, tax treatment, strategies like Section 83(b) elections and net unrealized appreciation, and risks such as concentrated stock positions is essential to maximizing value and avoiding costly surprises. With proper planning and coordination with tax and financial advisors, equity awards can be transformed into a strategic asset that supports both short-term financial needs and long-term goals.

Employee Stock Ownership Plans and other forms of equity compensation have become essential tools for attracting, retaining, and aligning top talent. Once limited to senior executives, these programs are now widely used across job levels and geographies, reflecting a broader shift toward long-term incentives and ownership driven culture.

But for all the attention paid to plan design, grant size, and vesting schedules, a critical part of the employee experience often goes unnoticed: dividend income, and more specifically, how much of it is silently lost to Dividend Withholding Tax (DWT).

In this whitepaper, you’ll explore:
• What DWT is and why it’s often overlooked in ESOP administration
• How recovery works and what’s legally reclaimable
• The strategic upside of integrating DWT recovery into your total rewards model
• Practical implementation options that minimize administrative burden
• A powerful DWT reclaim impact study, demonstrating the scale of opportunity
 

CONTRIBUTED BY SPRINTAX DIVIDENDS

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In 2024, New Zealand businesses faced political uncertainty and a challenging economic climate, yet continued to implement employee share plans (ESPs) to retain key talent amid ongoing migration and talent competition. Long-term incentives (LTIs) showed greater variation in face values, with ESG metrics increasingly incorporated into performance and vesting conditions alongside financial targets, reflecting formalised climate and sustainability reporting requirements. Effective ESPs, particularly when clearly communicated and supported by technology, boost employee engagement and loyalty, while recent tax changes—such as higher tax-free thresholds and proposed deferral regimes—aim to make these schemes more attractive and accessible.

Rolling out a global share plan requires careful planning, significant coordination across internal teams, and collaboration with external advisors to navigate legal, tax, securities, payroll, and labour law complexities in multiple countries. Companies must ensure clear communication, tax-efficient design, compliance with local regulations, equal treatment of employees, and practical considerations such as document translation and payroll restrictions to avoid pitfalls. When executed thoughtfully, global share plans can provide real value to both the business and its employees while supporting long-term engagement and compliance.

GMS Agency has transitioned to an employee ownership trust (EOT), with the EOT acquiring a majority stake while co-CEOs Sam Elder and Phil Craghill remain in leadership and as the largest individual shareholders. The move aims to align the company’s long-term vision with employee interests, safeguarding its culture, values, and independence while supporting sustainable international growth. Following strong revenue increases—18.75% in 2025 and over 220% since 2020—the agency seeks to ensure that those who contribute to its success directly share in its future.

In volatile markets, underwater stock options have lost much of their motivational and retentive value, prompting a renewed wave of repricings in 2025, especially in the Life Sciences sector. Traditional repricings are often costly and complex due to tender offer requirements, but the newer “Premium” Approach restores value by repricing options at the money while using a time-limited exercise period that effectively reinforces retention without making employees worse off. As falling 409A valuations continue, this approach has emerged as a practical, widely adopted solution to keep equity meaningful and employees engaged.

Many incentive plans rely on binary, high-risk equity like growth shares, which suit founders but can be unfair for professional hires who face the risk of ending up with nothing. Pairing growth shares with a lower-volatility instrument like a CSOP creates a balanced incentive stack, preserving upside while cushioning modest outcomes and keeping executives engaged. Ultimately, good incentive design is risk design: combining armour and ammunition manages downside as well as upside, which is essential in volatile markets.