Equity Grants to PEO Workers: Plan Design and Governance, Tax Implications, Foreign Employee Issues

Multijurisdictional companies, or those seeking to expand into new jurisdictions, typically turn to PEOs to engage local workers. At times, these companies may consider offering equity grants to PEO employees. However, such arrangements involve significant risks, including labor and employment law risks, tax implications, and other risks directly impacting a company's compensation and equity program.

A PEO is a third-party employer that hires workers as its direct employees to administer payroll and benefits, while those workers provide services to another company. If a company grants equity to these PEO employees, it will be subject to specific tax and legal implications and challenges because granting equity to PEO workers can be significantly different from granting it to direct employees or independent contractors.

In addition, companies preparing to grant equity in a new jurisdiction must confirm the grantee’s status under local law, which can profoundly impact equity plan compliance as well as the local compliance obligations and tasks that the PEO is willing to undertake.

Listen as our panel discusses best practices for structuring equity grants to PEO workers, plan design and governance issues, critical tax implications and restrictions, challenges for foreign employees, and implementation considerations.

I. Plan design and governance issues

II. Tax obligations and restrictions

III. Key cross-border considerations

IV. Regulatory considerations

V. Best practices in structuring equity grants to PEO workers

The panel will review these and other high priority issues:

• What plan design and governance impact equity grants to PEO employees?
• What are the essential legal considerations for granting equity to PEO workers?
• What are the tax implications and pitfalls to avoid for the company and PEO workers?
• What are the labor and employment law implications?
• What are best practices in structuring equity grants for counsel and companies?