understanding employee compensation and benefits presented by the employment and industrial...

UNDERSTANDING EMPLOYEE COMPENSATION AND BENEFITS

Presented by the Employment and Industrial Relations Law Committee and the Taxes Committee

JOINT SESSION EMPLOYMENT AND INDUSTRIAL RELATIONS AND TAX COMMITTEES

“Understanding Employee Compensation and Benefits”

MODERATORSMarianne Granhøj, Kroman Reumert, Denmarkmrg@kromannreumert.com

Juan Bonilla, Cuatrecasas Gonçalves Pereira, Spainjuan.bonilla@cuatrecasas.com

SPEAKERSMercedes Balado Bevilaqua, MBB Abogados, Argentinamercedes.balado@baladolaw.com.ar

Jack Bernstein, Aird & Berlis LLP, Canadajbernstein@airdberlis.com

Avik Biswas, RDA Legal, Indiaavik.biswas@rdalegal.in

Christopher Jordan, CMS, Germanychristopher.jordan@cms-hs.com

Daniel Ornstein, Proskauer Rose LLP, United Kingdomdornstein@proskauer.com

Todd Solomon, McDermott Will and Emery, USAtsolomon@mwe.com

Elissa Romanin, Minter Ellison, Australiaelissa.Romanin@minterellison.com

CASE STUDY

MicrocreditUS

Mirocredit

Australia

Mirocredit

Argentina

Microcredit

Canada

Mirocredit India

Microcredit UK

Microcredit

Germany

Bonus

BonusBonusBonusBonusBonus Bonus

Executive Equity PlanAll-Employee Equity Plan

IPO?

CASE STUDY: BONUS PAYMENTS

Annual Bonus• Based on cash mediated and profitability

worldwide• No limits or caps• 3-4 times of base salary

Mobile Employees• Obligation to defer 50%• Payable in Restricted Shares: 3 year vesting• Good leaver and bad leaver provisions

Retention Bonus• ¼ paid 1 year after IPO• ¾ 3 years after IPO• Continuity of employment

RESTRICTIONS ON EXECUTIVE PAY: BONUS CAPS: EU / AMERICAN / ASIA-PACIFIC APPROACH

• CRD IV Directive

• UK Challenge

• US Position

• Canada Perspective

• Australia Approach

• South America

• Asia / India

• Deferrals: clawback and forfeiture provisions

• Extraterritorial effect of bonus restrictions

• Pensions as a way to by-pass bonus restrictions?

• Exchange control issues

• Potential inconsistencies with local contracts

RESTRICTIONS ON EXECUTIVE PAY: BONUS CAPS

• When is it a taxable event?• Is it possible to defer taxation?• How complex can be the “mobile” element?• What if the Mobile employee is terminated before the release date?

BONUS FOR MOBILE EMPLOYEES

2014 2015-2018

Bonus Period

Vesting Period for Restricted

Shares

Full Ownership

•50% Cash•50% Restricted Shares

Release of Restricted Shares

2019

• Is it compliant with bonus cap rules?

RETENTION BONUS FOR CERTAIN EXECUTIVES

2014 2015 2016-2020

Award of Retention Bonus

IPO

¼ Bonus

¼ Bonus

¼ Bonus

¼ Bonus

CASE STUDY

MicrocreditUS

Mirocredit

Australia

Mirocredit

Argentina

Microcredit

Canada

Mirocredit India

Microcredit UK

Microcredit

Germany

Bonus

BonusBonusBonusBonusBonus Bonus

Executive Equity PlanAll-Employee Equity Plan

IPO?

CASE STUDY: EXECUTIVE EQUITY PLAN

• 4 year vesting• Performance metrics• IPO: Accelerated Vesting

Restricted Awards

TAX

• Taxation events:

−Grant

−Vesting

−Release / Exercise

−Sale

Potential deferral of taxation

• Mobile employees

EMPLOYEE EQUITY

EXECUTIVE EQUITY PLAN (1)

2014 2014-2018 2018-2025

Vesting Periodof the Restricted Awards

Grant of Restricted Awards

Exercise Period

Conversion of Restricted Awards into Stock Options

• Taxation events• Employment implications

EMPLOYMENT IMPLICATIONS

• Grant of Holding Co vs. Grant of local subsidiary

• Income tax withholding implications

• Choice of law and enforceability: US law and arbitration

• Termination payments

• Continuation of awards upon termination

EMPLOYEE EQUITY

EXECUTIVE EQUITY PLAN (2)

2014 2015 2016

IPO

• Taxation events• Employment implications

Conversion of Restricted Awards into Stock Options

Opening of Sale Period

Full Ownership

Restricted Awards

EMPLOYMENT IMPLICATIONS

• Impact and enforcement of non-competes on equity compensation

• Works Council communications

• Leave of absence provisions

EMPLOYEE EQUITY

CASE STUDY: ALL-EMPLOYEE PLAN

Restricted Shares

• 4 year vesting

• Automatic release upon

vesting

ESPP

• 10% withholding

• 15% discount

• 3 month life cycle

Eligibility: 1 year of service

Retirement Provision: “Rule of 55”

FUTURE THOUGHTS ON COMP&BEN

• Public supervision vs. individual approach?

• Increased regulation: moving out from employee equity plans?

• Fast changing compensation structures: how to make them effective?

• 20% cap on bonuses: is it really effective for the country?

Any questions?Many thanks!

JOINT SESSION EMPLOYMENT AND INDUSTRIAL RELATIONS AND TAX COMMITTEES

“Understanding Employee Compensation and Benefits”

MODERATORSMarianne Granhøj, Kroman Reumert, Denmarkmrg@kromannreumert.com

Juan Bonilla, Cuatrecasas Gonçalves Pereira, Spainjuan.bonilla@cuatrecasas.com

SPEAKERSMercedes Balado Bevilaqua, MBB Abogados, Argentinamercedes.balado@baladolaw.com.ar

Jack Bernstein, Aird & Berlis LLP, Canadajbernstein@airdberlis.com

Avik Biswas, RDA Legal, Indiaavik.biswas@rdalegal.in

Christopher Jordan, CMS, Germanychristopher.jordan@cms-hs.com

Daniel Ornstein, Proskauer Rose LLP, United Kingdomdornstein@proskauer.com

Todd Solomon, McDermott Will and Emery, USAtsolomon@mwe.com

Elissa Romanin, Minter Ellison, Australiaelissa.Romanin@minterellison.com