Square ESPP: What You Need to Know

5 MIN READ

Square offers employees the chance to own a part of the company at a discounted rate, adding to the benefits of working for the company. All purchases are optional and can be changed every six months.

The Employee Stock Purchase Program gives employees a chance to own a part of the company they work for and make a profit quickly based on the discounted purchase price of the stock.

What is the Square ESPP?

The Square Employee Stock Purchase Plan provides Square employees the option to buy Square stock at a lower price, with discounts of 15 percent or more. All Square employees who work over 20 hours a week and at least 5 months a year are eligible.

The ESPP program has two important dates you must know:

Offering period - Starts May 15 and November 15 each year and goes for 12 months
Purchase period - Each offering period has two purchase periods from May to November and November to May

Any shares you opt to buy are purchased on the last trading day of the current purchase period and are purchased at a discount of 15 percent or more of the lesser of:

Stock price at the beginning of the current offer period
Stock price on the purchase date

For example, if the stock price at the beginning of the offer period was $16 and the current Square stock price on the purchase date was $13, you’d buy the stock at 15 percent of the $13 price or $11.05.

You buy as many shares (up to 4,000) that your contributions allow. If you opted for 5% of your salary to be held for stock purchase and you make $60,000 per year, you’d have $3,000 available for stock purchase, which would buy 271 shares for a total of $2,995.

Things You Need to Know About Square ESPP

You may contribute 1 to 25 percent of your salary to the ESPP. This applies to your gross salary plus any commission, but the contributions are deducted after taxes (from your net income).

You can only change your contribution percentage during open enrollment and are effective during the next six-month period. The purchase periods are May 15 - November 15 and November 15 - May 15. You may decrease your contribution rate one time during your six-month enrollment.

You can purchase up to 4,000 shares on each Purchase Date and all shares purchased are held in an E*TRADE account. Any changes you want to make must be done through your E*TRADE account.

You may suspend or withdraw your contributions during the offer period. If you suspend your contributions, any money you have contributed thus far will still be used to purchase stocks on the purchase date at the end of the offer period. You’ll buy a lesser amount, but have ownership in the company based on the money you contributed.

If you want to start contributions again during the next offer period, you must re-enroll during open enrollment and choose your contribution amount. If you withdraw rather than suspend your contributions, you will completely pull out of the program and receive a refund of your contributions made thus far.

You can sell the stock at any point during the Trading Window Period in order to avoid insider trading.

Understanding Your Tax Impacts as a Square Employee

You don’t incur a tax liability on your ESPP purchase, which adds to the benefit. It isn’t until you sell your stock shares that you’ll pay taxes on your capital gains. This minimizes your tax liability on the benefit right away, but make sure you talk with your tax advisor about your future tax implications when you sell the stock (hopefully for a profit).

If you hold your shares for more than 2 years, you’ll pay taxes on the lesser of:

Sale at a gain - 15% of the stock’s fair market value or the closing price on your offering date (the first date you were eligible)
The profits you made on the sale of the shares

If you hold the shares for less than 2 years from the offering date and less than 1 year from the purchase date, you’ll pay:

Ordinary taxes on the difference between the price you paid and the fair market value
Capital gains taxes

Related Article | When Should You Sell Your ESPP Shares?

Get Your Square Stocks at Lower Prices

The Square ESPP helps you gain ownership in Square at lower prices, which increases your profits when you sell the stock (when it’s not considered insider trading). You can change your contributions every six months and can suspend or withdraw your contributions throughout each period should you need to. Square ESPP purchases increase the benefit of working at Square by allowing you to invest in the company you work for.

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