ESPP Procedures for Non-US Employees

It's the season for giving. My gift to you this holiday season (drum role) is a handful of tips to guide you through your upcoming ESPP purchase as it relates to non-U.S. plan participants.

Administering an ESPP can be tricky. This can be further complicated, however, when your plan includes non-US participants. Here are some recommended procedures to incorporate into your international ESPP processes.

Eligible "compensation." Educate local payroll as to what constitutes eligible "compensation" under your plan. Then, audit local payroll ledgers to ensure that contributions are being withheld from the right source of income.

Conversion information. Communicate to plan participants (and local accounting/finance departments) when contributions will be converted during the purchase period, what source will be used to convert contributions and the actual conversion ratio used to convert contributions.

Intended recipients. Double-check intended recipients for all correspondence about your plan. Employees in countries that are not eligible to participate in your ESPP should never receive information about the plan.

Documentation. Customize communications so that they incorporate special procedures for countries where non-standard arrangements exist, e.g., an Israel trustee plan, and omit all references to U.S. tax withholding and reporting obligations from any non-U.S. communications.

Contribution file. Determine how ESPP contributions have been transmitted to you, e.g., in local currency or U.S dollars prior, to uploading them into your system.

Software use. Input exchange ratios into your software system where possible and let your system calculate currency conversations for you. Then, audit the converted currencies in your system using another source, e.g., a spreadsheet or Microsoft Access file.