Equity is an attractive compensation option to offer employees. Startups and fast-growing teams can attract and retain talent while also rewarding employees for their contributions to the company’s vision.
But if you hire globally, offering equity is complicated. Even a straightforward equity plan can trigger country-specific tax issues, securities filings, currency exchange requirements, or payroll withholding obligations.
If you use an Employer of Record (EOR) to manage your global workforce, you can still offer equity to your global team. However, the “how” depends on where the employee lives, the structure of your equity, and the type of additional legal or tax support you may need.
Key takeaways:
- Equity plans are a way to attract and retain talent.
- Companies offering equity across borders must consider local tax, securities, and reporting regulations.
- The biggest risks happen when the company and employee aren’t prepared for the legal and tax implications of granting equity.
Why Equity Matters in a Global Hiring Strategy
Offering equity as a benefit generally means giving employees a way to participate in your company’s success. Equity gives employees a stake in long-term outcomes — whether that’s an acquisition, a public offering, or another type of exit.
Equity enables companies to compete for talent without tying up a significant amount of cash in high salaries or large bonuses. It can be a talent differentiator where hiring is really competitive. In some countries and regions, offering equity isn’t the norm, so including it in a job offer makes an employer stand out.
Because equity is typically earned over time through a vesting schedule, it creates an incentive for employees to stay with the company. For global teams, equity can also help create a strong company culture. A mindset of shared ownership aligns employees with the company’s goals.
Offering Equity to Employees Employed Via EOR
In many cases, employers can grant equity to employees hired through an EOR, but it’s often handled outside of the EOR-managed employment agreement.
That’s because an EOR is the legal employer in the worker’s country for HR details, such as payroll, tax withholding, statutory benefits, and local employment compliance. Equity, however, is typically issued by the parent company, not by the EOR.
In practice, this often means that the employee signs their local employment agreement with the EOR, and then separately receives equity documentation directly from their company. The documentation includes information about the equity plan, an award agreement, and any country-specific legalities.
While offering equity to EOR employees is possible, it requires thoughtful structure and country-specific review. In some jurisdictions, certain equity types may not be available at all, or they may require additional filings and approvals.
Common Equity Structures for Employees Hired Under an EOR
Some equity structures are widely used and relatively flexible across borders. Others can become complicated due to tax treatment, securities rules, or foreign ownership restrictions.
Below are the most common equity structures used for global employees.
Traditional Stock Options
Stock options give employees the right to purchase shares at a predetermined price (the strike price) after the shares have vested. For international hires, non-qualified stock options (NSOs) are standard because they’re generally more flexible than options with special tax treatment that may be limited to employees in a specific country.
Options can feel familiar to employees in tech and venture-backed companies. But stock options can be difficult in countries with strict currency controls or limitations on foreign shareholding. The tax implications can also vary widely.
Restricted Stock Units (RSUs)
RSUs are a promise to deliver shares (or the cash equivalent) in the future once vesting conditions are met. Unlike options, employees typically don’t have to pay to purchase the stock.
Globally, RSUs can create immediate tax obligations at vesting in many jurisdictions. They may also require payroll withholding.
Phantom Equity (Cash-Settled Awards)
Phantom equity is designed to provide employees with the value of shares without requiring the issuance of actual stock. Instead, employees receive a cash payout tied to the company’s valuation growth, often based on a defined number of “phantom shares” or “phantom units.”
This approach makes sense in countries that limit foreign stock ownership. But phantom plans require specific handling on a company’s financial statements (treated as a deferred compensation liability on the balance sheet).
Phantom equity can also feel less like ownership to employees compared to actual stock, even though the payout is designed to be the same.
Key Legal and Tax Considerations
An equity plan that’s “standard” in the country where a company is based (e.g., a Silicon Valley startup in the U.S.) could be noncompliant elsewhere. It all depends on how (and when) the local jurisdiction treats the equity as compensation.
Here are some of the most significant legal and tax considerations to plan for.
Taxation
Equity-related taxation often depends on when the benefit is considered “received.” In some countries, that might be when the options are granted. In others, it happens at vesting. The sale of shares may trigger a capital gains tax, or the employee may pay income tax based on the difference between the strike price and the sale price.
Employees need to understand the different taxable events, so they’re not caught off guard with a hefty tax obligation.
Payroll Withholding and Reporting
In some jurisdictions, equity is considered a form of compensation. That means equity income may need to be reported through payroll, with income taxes and, in some cases, social contributions withheld by the employer.
Securities Law and Compliance
Offering equity is not just a compensation decision; it's a strategic move. In many countries, equity awards are also regulated through government securities agencies.
Depending on the country and the number of employees, your company may need to prepare disclosures or provide additional documentation to employees.
Foreign Exchange and Local Approvals
Some countries regulate how residents can participate in offshore equity plans and move funds across borders. That can add operational steps, including registrations, approvals, or reporting requirements.
Currency exchange rates can also impact option value, and need to be considered when offering employees equity.
How Equity Is Reflected in Employment and EOR Agreements
When companies first consider equity for EOR employees, it’s tempting to treat equity like any other benefit — something you simply add to the employment contract.
However, equity is often not included in employment agreements managed by an EOR. Instead, it’s handled through separate plan documentation:
- Equity plan documents define eligibility and the overall program rules
- Award agreements specify the employee’s grant, vesting schedule, and exercise terms
- Country-specific information addresses local tax, currency exchange rates, or securities considerations
It’s also common for EOR service terms to treat equity separately from payroll, statutory benefit calculations, and other local employment entitlements. In these cases, your company would need to manage the equity compensation outside of the EOR agreement.
It’s important to do a country-by-country review before making statements like “equity is part of your compensation package.” You have to clarify and clearly document what that means locally.
Country-level Differences Employers Should Expect
Outside of taxes, equity can have significant structural differences from county to county.
Some of these differences include:
- Whether equity can be offered to non-traditional workers (like contractors or advisors)
- Whether equity must be treated as supplemental pay (rather than base pay)
- Whether employees need specific disclosures, filings, or approvals
- Whether foreign exchange registrations apply
- Whether equity impacts statutory benefit calculations
The reality is that what works in one country might be noncompliant — or impractical — in another. Global equity planning typically requires local legal and tax advisors, as well as a willingness to adjust your equity structure according to each jurisdiction.
Risks of Getting Equity Wrong
If equity is structured poorly, it can create serious compliance, financial, and employee experience issues.
Here are some of the risks companies need to consider.
Equity Treated as Wages or Compensation
If a jurisdiction views equity benefits as wages or compensation, it may trigger withholding obligations, social contributions, or inclusion in statutory benefits calculations.
Companies can also face disputes with employees who’ve been terminated. Former employees may claim that equity should be treated like earned wages (especially around vesting acceleration or payout expectations).
Securities Noncompliance
In some countries (such as the U.K.), your plan may require you to provide a prospectus to employees. You may also have other disclosure obligations or securities compliance requirements. Failing to follow these steps can expose the company to regulatory penalties and reputational risk.
Reporting and Documentation Gaps
Equity adds new reporting obligations in many countries. These may include tax forms, local reporting, or even employee asset declarations (depending on the jurisdiction and the award type).
Lack of proper documentation can create problems later, especially during audits, due diligence for fundraising, or a potential acquisition.
Employee Dissatisfaction
If equity is promised but then delayed, altered, or later found to be noncompliant, it can damage employee trust.
The same is true if employees are surprised by taxation at vesting or when they exercise their options. You can mitigate these risks through clear communication about the equity plan, tailored to the employee's specific jurisdiction.
Best Practices for Offering Equity Through an EOR
In addition to compliance, consistency and fairness are also crucial components of running a global equity program. You want employees to feel like owners, without exposing the company (or the employee) to risks.
Set Clear Eligibility and Vesting Rules
Within your equity plan, outline:
- Who is eligible (by role, tenure, performance, or location)
- The type of equity each eligible group receives (options, RSUs, phantom)
- Vesting schedules
Then adapt the plan where necessary. You want to be fair to your employees, but global equity often requires local variations.
Document Everything
Make sure you create a paper trail for your equity plan, and incorporate it into your systems.
- Centralize plan documents and award agreements
- Track grant dates, vesting schedules, and employee residency changes
- Maintain a clear approval record for each grant
Communicate the Equity’s Value
Equity education should not be a one-time onboarding conversation; it should be an ongoing process. For employees to feel like their equity is worth something, you should provide:
- Plain-language explanations of potential outcomes (not just legal documents)
- Country-specific guidance on common tax and reporting triggers
- Regular reminders ahead of significant events (like vesting dates or exercise windows)
You should also keep employees connected to company milestones. Equity feels more tangible when employees understand how the company's success is connected to the long-term value of their equity.
When an EOR Is the Right Fit for Equity and When It’s Not
You can remain competitive globally without creating compliance risk with a carefully designed equity plan. If you're building an international team quickly but aren't ready to establish local entities in every country, an EOR can be a valuable partner. It allows you to hire compliantly by handling local employment contracts, payroll, and employee benefits.
This setup works best when you’re willing to manage equity outside of the EOR. Alternatively, you need to find an EOR that is willing to handle the logistics of your equity plan.
However, if you’re scaling headcount heavily in one market, opening a local entity may give you more control. You can grant equity to your employees with a deeply localized structure, thereby reducing the operational challenges that come with country-specific filings or approvals.
Offer Benefits to Your International Team With RemoFirst
While RemoFirst doesn’t manage the logistics of offering equity to your employees, we manage the foundational HR components that make global employment workable. RemoFirst can handle compliant hiring, local employment contracts, payroll, taxes, and country-specific benefits administration.
We also enable companies to offer localized private health insurance. With RemoHealth, you can provide a competitive benefits experience for international employees.
If you want a compliant foundation for your global team, schedule a demo with RemoFirst to learn more.
