How does the social security report work

Introduction

For many jurisdictions, employers are legally required to pay social security contributions (e.g., employer-paid taxes or national insurance) in connection with employee compensation, including share-based payments. These employer obligations are treated as a form of employee benefit under IAS 19. While the contribution to be paid at the point of settlement they are typically accounted for as a liability, a provision, over the vesting period.

Please note that IAS 19 does not explicitly use the term "social security", but social security contributions are implicitly included within the broader definitions of employee benefits, specifically under short-term employee benefits or post-employment benefits, depending on their nature.

How can I get access to the Optio Social Security report?

The Optio social security report is one of the reports in our report suite, which is typically included as part of our standard financial reports. Our reporting suite is designed with flexibility in mind, allowing you to add this report at any time to meet your specific reporting needs if it's not already included for you.

If you're interested in enhancing your financial reporting with the Optio Social Security Report, or if you have any questions about our modular reporting options, please don't hesitate to reach out. Contact your Optio contact person or email us at support@optioincentives.no for more information.

How can I generate the Social Security report? 

When you create a new report (see How to create a new financial report), the social security report will be part of the complete report output if it is included in your report configuration(s).

Note that in case you have several report configurations available, the social security report may not be included in all of them. Hence, you can try to use a different report config if it is not included in your default report config. If you would like to adjust any of your existing report configs you can reach out to your Optio contact.

What does the social security report look like?

When you run a report, the first page you are redirected to is a web-version of the report. In the web version of the report you have access to the complete report. You can also download the full report to Excel, and the Excel download will contain all the information you have access to in the web-version of the report. 

To download the report to Excel, you can at any view of the report click on the Download report button. 

Share price

At the top of the report you will find information about the share prices relevant to the reporting period. The social security provision calculations are based on the share price at the opening balance date and closing balance dates, and the Share Price OB and Share Price CB within this first reporting section display the share prices applicable at these dates. 

In the Excel report, the Share price OB and Share price CB is included as part of the share price table at the top of the Overview tab.

Overview tables

On the overview tab of the report there will be a separate table for the social security report. This overview table contains a high-level view of the key figures relevant to social security. 

The Social Security Provisions overview tables contain the following columns:

1. Opening Balance: The social security provisions that should have been recognized as of the first date of the reporting period
2. Period: The social security provisions to be recognized within the period
3. Closing Balance:  The social security provisions that should be recognized by the last date of the reporting period

Just like all our overview tables you can select to view the overview table with different groupings to see the social security figures according to your liking. If you prefer a different grouping than available, please reach out to your Optio contact and they can configure these tables for you.

In the Excel download you can see the same tables, where each table grouping is included as separate tables stacked on top of each other.

Detailed social security figures

To get a complete understanding of the social security provision figures in the overview, you can view the detailed social security figures with a complete audit-trail by clicking on the SocSec tab. 

In the Excel report the social security details can be accessed by clicking on the Soc Sec tab in the Excel.

The social security provision detailed report has a similar structure to the other report, where each row in the table represent one TRANCHE, which reflects a single vesting of an award for a person, program and sub program basis. On each row you will find information about the specific TRANCHE the row relates to, the relevant input figures used for the social security provision calculations, columns with calculations steps, and the resulting provisions. The report contains all information required in order to calculate the social security provision figures.

Social security provision columns

To better understand the social security provisions detailed report, an explanation of a selection of the columns can be found below:

• Strike OB/CB: These are the updated strike prices of the award as of OB- and CB-dates. These will be used to calculate the intrinsic value, which is the basis of the provision calculations in most jurisdictions. 
  
   
• Quantity OB/CB: These are the outstanding quantity at the OB- and CB-date of the report. In cases where an employee move from one entity to another within the period, another row for the same award will be displayed in the report and the quantity will be reversed out from the old entity and fully move into the new one. 
  
   
• Perf. Adj. Estimate OB/CB: These are the latest performance estimates as of OB- and CB-date applicable to the social security report. If there are any updates to the expected achievement of a performance condition within a period the estimate as of OB and CB is displayed in these columns. Any impact on the provisions caused by a change in performance estimates in the period will automatically be trued up within the period.
  
   
• Perf. Adj. Quantity OB/CB: These reflect the quantity adjusted of the performance estimates as of the OB- and CB-date of the report. 
  

• Soc Sec Tax Rate OB/CB: These are the applicable social security tax rate for the tax jurisdiction of the entity or the employee. In the case of an employee moving from an entity of one tax jurisdiction to another, the applicable tax rate per entity will be visible on the separate row for each entity. In the case where a tax rate change for an entity or employee within the period, the change can be observed from the OB- to CB-version of the columns, and the resulting impact on the provisions will be trued up in the period . If an employee has a specific tax rate set to override the general tax rate set on the entity, that employee specific tax rate will also be displayed here. 
  
   
• Valuation method: This column indicate what the instrument valuation methodology is used for the social security provision calculations. In the vast majority of tax jurisdiction the Intrinsic value is the accepted method used, while for some (such as Sweden) a Fair Value should be applied using the appropriate fair value valuation methodology (e.g. Black & Scholes) for the type of instrument. 
  
• Share Price OB/CB: This is the share price at the opening- and closing balance date of the share the instrument will be settled in.
  
• Value OB/CB: These are the value basis' used for social security provision calculations. If valuation method for social security provisions is Intrinsic value, the value is calculated by deducting the Strike OB/CB from the Share Price OB/CB. While if the valuation method is fair value the resulting fair value from the valuation model will be displayed. 
  

• Earned OB / Period / CB: The Earned reflect the percent of the employees service period that has been completed at the OB- and CB date. This is typically the percent of time passed at OB- and CB date between the Grant date and Vesting date, but the service period can deviate from these if required. 
  

• Provision OB / Period / CB: These figures reflect the social security provisions that should've been recognized as of the OB date, the additional provisions to recognize for the period, and the provision that should be accumulated as of the CB date of the period. In the case of mobility the full provision will reverse out of the entity an employee is moving out from, and the new entity will recognize the full provision as of the CB date.