Complex Status Rules are Here to Make Your Life A Little Bit Easier

August 8, 2019 Jeremy Dosemagen


Synergy 2020 Icon This topic was initially delivered as a session at Synergy 2019 in Scottsdale, AZ.
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It’s an average workday and you’re cruising through the day’s tasks, when suddenly you get an email from your company’s legal counsel: the leadership team decided to update clauses in all equity award agreements that specify how awards are handled when an employee is terminated. For years this has been a simple combination of the termination type (e.g., voluntary, involuntary, retirement, etc.) and the award type (e.g., stock options versus restricted stock), but there will now be additional factors to consider. The grant date of the award, the employee’s location at time of grant, and specific clauses that may or may not be included in the grant agreement…you’re considering everything that’s involved and you think, “How am I going to handle all of this?!”

In an increasingly complex and connected business world, it’s not uncommon for companies to update their equity compensation plans on a regular basis to stay competitive with benefits offered elsewhere. The average employee isn’t sticking around as long, and expanding global companies need to consider that their local equity incentives may not attract top talent abroad. The result is increasingly flexible equity plans and more variability in legal award agreements.

As shown in the scenario above, all of this is leaving equity administrators scrambling to find ways to accommodate changing plan documents, while also avoiding an overwhelming amount of manual work. Here at Shareworks, we saw the need to help our corporate clients who were dealing with the administrative burden imposed by unique or changing employee termination conditions. That’s why we’re proud to announce that Shareworks can help:  our recently developed complex status rules functionality tackles these challenges in an automated way!  We’ve got solutions for both private and public companies, so you can leverage this functionality no matter where you’re located in the company lifecycle.

How Does it Work?

For many years, we’ve leveraged status rules in Shareworks to automatically handle the treatment of an equity award when an employee’s status changes. When we say status changes, we’re referring to anything from a new hire joining the company, to an employee leaving the company voluntarily or via a termination. Additionally, we’ve built rules that handle retirement, leave of absence, and even employee rehires – all in an automated way.

The rules, also called employee events, are triggered when the employee’s status is updated by the administrator in their Shareworks account.  This happens most frequently via demographic file import, when a file is automatically sent from a payroll or an HRIS system and then loaded into Shareworks through Import Express, our SFTP interface. If you haven’t yet set up a similar file feed, we highly advise it!

It’s important to note that the employee events we can trigger with the employee status can do quite a few different things. Examples of the most common events we see our clients implement include:

  • Cancellation of the vested or unvested shares in a grant at time of termination
  • Automatically setting a future date where terminated employees will lose access to Shareworks
  • Triggering a message to an administrator when a termination is imported
  • Accelerating or stopping vesting on a grant
  • Prorating the balance of an award when an employee chooses to retire

The list of examples above is a short one – status rules can help in so many ways! In most cases, these rules are set-up when your company is first implemented onto Shareworks. Then, as time goes on, it’s likely that the structure of your company’s equity plan will change. The change could come in the form of a corporate action like the acquisition of another company that issued equity with different terms, or simply allowing for more preferential treatment upon retirement after an employee reaches a threshold in years of service. We’ll look more closely at one of these examples and how complex status rules can help address some of the manual work it creates.

Example Use Cases for Complex Rules

In short, complex status rules allow us to use a wide range of variables to write IF statements that will drive what happens when employee status is updated. If you have ever written an IF statement in Microsoft Excel, you’re already well on your way. There are many pre-defined variables such as an employee’s age, the grant date or grant name, but we can also write any employee groups or custom fields into the equation! This means that you can have Shareworks automatically apply employee events by referencing the employee’s cost center or work country (as an example).


the Shareworks interface where a complex status rule can be added manually (please note this image may not reflect changes made to user interface beyond July 2019).

Figure 1: the Shareworks interface where a complex status rule can be added manually (please note this image may not reflect changes made to user interface beyond July 2019).

Different Treatment For Equity Added Through A Corporate Merger/Acquisition

Suppose your company has only ever had offices in the United States, but you recently acquired a Canadian subsidiary. In the United States, you always cancel the unvested quantity of an award when an employee terminates. Your legal team has notified you that the Canadian plan states unvested awards will be prorated and accelerated upon termination, and you are going to honor that provision for current Canadian employees.

Historically, companies would need to build separate status rules for each plan. Even worse, they would need to separate their grants according to employee location (US versus Canada) and then manually link every new award to the appropriate status rule. If a mistake was made, it could result in US employees retaining access to their unvested awards after leaving the company, and possibly transacting on this equity. This introduces loads of manual work for plan administrators, along with financial and reputational risk!

With the one-time setup of a complex status rule, we can tell Shareworks to reference the employee’s location at time of grant, cancel unvested awards at termination for US employees, and prorate/accelerate the award for the Canadian team, with no manual intervention needed! Better yet, there is no need to make updates as new grants are awarded. Take the extra time you gain back and put it toward something productive!

I Love Them, I Need Them, I Want Some More of Them!

So, have any light bulbs gone off?  Yes?! Excellent!

If you currently have any manual work associated with an employee status change, we highly encourage you to reach out to your service team so we can brainstorm together and make your life simpler! We’ll look to add automation wherever possible, and we may even be able to help improve a process you didn’t know was more complicated than it needed to be.

Please reach out to your Client Service Manager or Relationship Manager today, or request a demo with a member of our Sales team to learn more. We would love to help!


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