It's year-end planning time: A strategic guide for 2026 preparation

It's that time of the year when leadership teams across industries start to shift their focus from daily execution to strategic reflection. Year-end planning provides a rare opportunity to assess progress, identify gaps, and prepare for the year ahead. It's also a good time to meet with different departments to review the current procedures and discuss any changes for the coming year.

As we learned in our 2025 Workplace Plan Participant Survey, 99% of all stock plan participants consider equity compensation important. With such high regard for this form of compensation, it's clear that equity plans remain a powerful tool for attracting, retaining, and engaging employees. Companies that provide employee equity plans will find this annual reflection to be an important exercise to ensure that their equity programs remain competitive, compliant, and beneficial for participants.

"Equity compensation is a powerful incentive and motivator for your plan participants. By taking the time for truly thoughtful year-end planning, you can build on areas of strength, identify paths to improvement, and help to streamline events in the new year for both the company and your participants."

—Joel Gerringer
Director, Client Service, Charles Schwab

As 2025 winds down, here are some ideas to consider as your company prepares for next year.

Strategic purpose: Is your equity program still delivering?

Equity plans should never be a "once and done" benefit for your employees. Their effectiveness depends on whether they continue to serve the goals and expectations of plan participants. Don't forget to determine if the plan is still serving your company's goals too. Year-end is the perfect time to ask the right questions.

• What purpose does our equity plan serve today? Is it primarily about retention, rewarding performance, aligning employees with shareholder value, or recruiting top talent in a competitive labor market? It's important to know the answer.
• Is the current plan aligned with our growth stage? For early-stage companies, stock options may be the right path. For mid-stage or mature organizations, restricted stock units (RSUs) or performance shares may better balance risk and reward.
• Do employees still understand the value of their equity? Ensure your team has awareness of how their equity aligns with market standards. If not, it may be a great time to expand educational opportunities around your company's equity program. It's helpful to ensure they understand and appreciate the program's value. Schwab supports equity programs as part of a long-term financial strategy for achieving financial goals.

Review equity grant practices and burn rates

Equity is not an infinite resource. Each grant issued to employees dilutes the equity of the existing shareholders, so it's important to be thoughtful stewards when determining grant allocation. Year-end is a smart timeframe to evaluate your equity practices.

• Equity burn rate: What percentage of outstanding shares was granted to employees this year? Check to see if you align by reviewing industry standards for equity grants.
• Share inventory: How many shares remain available in the equity pool? Will a shareholder vote be required to authorize additional shares in the future?
• Grant fairness and timing: Were awards made in an equitable way, or were they conducted randomly? Consistency builds trust and reduces perceptions of favoritism. Take this opportunity to check if your company has the tools and resources to ensure equity is awarded based on established company policies.
• Grant sizes: Are award sizes aligned with market competitiveness and internal pay equity principles?

By building structure around equity grants, companies become more thoughtful about balancing equity allocation with fiscal responsibility.

Tax and compliance considerations

Tax and compliance should be at the top of your list during year-end planning. Overlooking tax and legal equity policies can create both regulatory and reputational risks.

• ISO/NSO compliance: Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NSOs) carry different tax treatments. Companies should confirm that grants were administered correctly, with exercise prices at or above fair market value.
• Payroll reporting: For public companies, ensure that taxable income from exercises, employee stock purchase plan (ESPP) purchases, or RSU vesting is captured and reported accurately on W-2s.
• Global compliance: If your workforce spans multiple counties, regions, or jurisdictions, check on local tax or reporting requirements. Non-compliance in one place or country can ripple into broader reputational harm.
• ISO/ESPP surveying: Surveying ISOs and ESPP dispositions is an important area to review for year-end planning. Collecting information from current and former employees who sold shares early enables your company to fulfill tax reporting obligations and claim a tax deduction.

Meeting with your legal and tax advisors before year-end prevents landmines and issues from popping up unexpectedly.

Budgeting and forecasting equity costs

There's no question that equity carries costs that must be accurately forecasted. As part of year-end planning, companies should be diligent about budgeting for equity costs.

• Evaluate accounting expenses: Ensure that reporting for the past year reflects the true impact on earnings.
• Forecast dilution: Determine how future grants will affect ownership percentages and shareholder value.
• Plan for liquidity events: For companies considering IPOs or acquisitions, equity plan design and disclosure will come under heightened scrutiny. Make sure your information is buttoned up.

The more proactive the planning, the more confidence finance leaders can provide to boards and investors.

Communication and education

The phrase we've all heard is "communication is key." When it comes to equity plans, this is especially true. Participants who don't appreciate the value of their equity allotment are less likely to feel motivated by the award. Year-end is a good time to step up the communication and reminders with your staff.

• Educate: Explain the plan to new equity recipients, and remind current employees how stock options work, along with the tax implications.
• Make statements available: Provide plan participants with a year-end equity summary, showing vesting progress, estimated value, and future potential.

Good communication can transform equity from a simple HR benefit to an understandable, motivating force.

It's a company-wide effort

Now that we've shared the key items to consider as part of your year-end planning, it's important to recognize the departments in your organization that will benefit by being a part of planning discussions. Here are a few key groups.

• Payroll: Payroll is a good place to start your planning discussions. Review W-2 reporting for different stock plan transactions. Go over tax-rate and limit changes for the upcoming year, and review what has been working and what could be improved.
• Accounts payable: If your company grants equity to people outside the organization—nonemployees or outside directors, for example—make sure to meet with accounts payable to confirm that their taxable stock plan transactions are reported correctly. Same goes for any taxable transactions recorded after an employee's death or life event, such as a divorce.
• Accounting: Year-end is a great time to review volatility, interest rates, expected life, etc., for stock option grants. Any other unusual transactions like option/award modifications or option exchange programs that occurred over the past year should be reviewed in case the auditors come knocking.
• Human resources: Meeting with HR should be considered a check-in. Confirm if they plan to make changes for the coming year, and determine if any updates need to be made to the current grant guidelines.
• International teams: Does your company offer stock compensation to non-U.S. employees? If so, year-end is the right time to check in with your external advisors to see if any local reporting requirements have changed.

The new year is coming—are you ready?

Year-end planning is all about reviewing the previous year, collaborating with your teams for the coming year, and setting an actionable equity plan road map for success. Think about when you'll schedule important events, such as employee education sessions, or upgrade equity software for better reporting and compliance. How will you promote equity in recruiting strategies in the coming year? By entering the new year with confidence, you'll reduce uncertainty and position your equity program as not only a financial incentive but a cultural signal that employees are valued.

Equity compensation remains one of your company's most powerful tools. Thoughtful, proactive year-end planning ensures that this tool delivers on its promise—not just for the organization but for every employee who holds a stake in its success.

If you need help formulating your company's year-end strategy, our team of financial professionals is always available to help.