When startups recruit employees to join their companies, equity is often a major component of their salary offer. This form of non-cash compensation may include options, restricted stock units, or shares, for example, and give workers partial ownership of the firms they join.
While equity represents “an increasingly important part of total compensation” for early-stage startups, they can be complex from a compliance perspective, particularly when granted to employees based in jurisdictions abroad, Ryan Freeman, head of partnerships at global payroll and HR company Deel, told HR Brew. As companies have grown more distributed, managing equity-based compensation has become more of a headache, he said.
To address these challenges, Deel is expanding its equity capabilities through a partnership with Carta, announced on May 14. The new functions will help Deel customers not only offer equity to global workers, but also comply with local tax laws where they’re based, Freeman said.
How Deel’s equity offerings work. Deel, which seeks to help employers manage onboarding, local payroll, and compliance for global workforces, already allows customers to manage equity grants through their platform.
The new offering will log equity “events,” such as issuances and exercises, and calculate the amount of taxes owed based on the region in which they’re based, as well as collect and withhold tax payments according to a press release from the company.
Tax obligations are one of the most common sources of confusion when it comes to equity, Jackie Ammon, a senior business development manager at Carta, told HR Brew last year. And the complexity grows for companies managing employees abroad, Freeman said.
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The hope in deepening Deel’s equity offerings with Carta, he said, is that more employers will feel comfortable offering equity to workers based in other countries.
“If you’re a startup, and there is compliance risk with issuing equity cross-border, that may inhibit you from doing so in the first place,” Freeman said. “By simplifying and increasing the quality of compliance, we allow businesses to more confidently offer that equity as a source of compensation and a shared investment in business.”
The rollout. The new equity tax withholding features will be available to Deel customers with employees in about a dozen countries, including France, Nigeria, Singapore, and Switzerland. Deel plans to add additional countries, including Canada, in the coming weeks, Freeman said.
Even as regulators around the world are scrutinizing companies’ use of independent contractors, companies like Deel are bullish on the potential of this hiring scheme, particularly for employers who want to hire outside of their borders. Deel seeks to help employers navigate the regulatory landscapes where they operate, and launched a compliance hub with an eye toward this in December.
The equity tax withholding features are part of Deel’s broader mission to “automate and simplify cross-border compliance” so that employers can offer “the most compelling total rewards package” needed to attract top talent globally, Freeman said.
Some of Deel’s competitors, like Remote and Papaya Global, also offer tools to help employers manage equity offerings for global teams. Rippling, another workforce management platform, announced an integration with Carta to help customers manage employees’ salary and equity data in 2022.