Managing Global Mobility at an investment bank, where deferred compensation was a large and important component of compensation, I would spend weeks each year calculating and reporting vests and exercises for my expat population. As the numbers fell into place and the tax liabilities were calculated and paid, I would start the process of allocating the amounts across cost centers, and I’d cringe to myself knowing that these business line managers had no idea they were about to receive this hit to their budgets.
The cost estimation and budget approval process for each assignment was a crucial part of the preparation for each assignment. Managers would adjust an allowance by a few thousand dollars or query why housing in Hong Kong was so expensive, but we were missing a fundamental piece of the puzzle – an accurate calculation of the amount of deferred compensation that would relate to the assignment, and a timeline of when these liabilities would hit our budgets.
Topia’s new Deferred Compensation feature – an add-on to our Topia Plan cost estimate and scenario planning tool – helps customers to accurately estimate the cost of deferred compensation relating to an assignment, including grossed up tax costs. We configure your deferred compensation plans – both cash and equity – into our platform, including the specific vesting schedules. When you run a cost estimate for your employees, the system calculates the amount of future vestings relating to the assignment period – including those that will vest after the assignment has ended – includes the relevant amount in the estimate and calculates the grossed up taxes accordingly based on your equalization policy.
You can then run accrual reports and track actual vestings against your original accruals as the assignment progresses, and recalculate your estimates as share prices or the employees situation changes.
Being able to accurately forecast these costs in the relevant periods to the business stakeholders helps build that trust and prevents future issues. This is the first time this challenge has been solved 100% through technology – no manual apportionments, no side calculations, no consulting fees – and we’re really excited about the efficiency, accuracy and value this can deliver to our customers. To learn more about Topia Plan click here. To see our cost estimates with deferred compensation in action click here to request a demo.