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Stock-based compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

The Company has granted stock-based awards under the Genpact Limited 2007 Omnibus Incentive Compensation Plan (the “2007 Omnibus Plan”) and the Genpact Limited 2017 Omnibus Incentive Compensation Plan (the “2017 Omnibus Plan”) to eligible persons, including employees, directors and certain other persons associated with the Company.

A brief summary of each plan is provided below:

2007 Omnibus Plan

The Company adopted the 2007 Omnibus Plan on July 13, 2007 and amended and restated it on April 11, 2012. The 2007 Omnibus Plan provided for the grant of awards intended to qualify as incentive stock options, non-qualified stock options, share appreciation rights, restricted share awards, restricted share units, performance units, cash incentive awards and other equity-based or equity-related awards. Under the 2007 Omnibus Plan, the Company was authorized to grant awards for the issuance of up to a total of 23,858,823 common shares.

2017 Omnibus Plan

On May 9, 2017, the Company’s shareholders approved the adoption of the 2017 Omnibus Plan, pursuant to which 15,000,000 Company common shares are available for issuance. The 2017 Omnibus Plan was amended and restated on April 5, 2019 to increase the number of common shares authorized for issuance by 8,000,000 shares to 23,000,000 shares. No grants may be made under the 2007 Omnibus Plan after the date of adoption of the 2017 Omnibus Plan. Grants that were outstanding under the 2007 Omnibus Plan as of the Company’s adoption of the 2017 Omnibus Plan, remain subject to the terms of the 2007 Omnibus Plan.

Stock-based compensation costs relating to the foregoing plans during the years ended December 31, 2019, 2020 and 2021, were $82,802, $72,709 and $80,548, respectively, and have been allocated to cost of revenue and selling, general, and administrative expenses.

Income tax benefits recognized in relation to stock-based compensation costs, including options, RSUs and PUs, including excess tax benefits, during the years ended December 31, 2019, 2020 and 2021 were $18,921, $21,832 and $21,857, respectively.

Stock options

All options granted under the 2007 and 2017 Omnibus Plans are exercisable into common shares of the Company, have a contractual period of ten years and vest over three to five years unless otherwise specified in the applicable award agreement. The Company recognizes such compensation cost over the vesting period of the option.

The compensation cost is determined at the date of grant by estimating the fair value of an option using the Black-Scholes option-pricing model.

The following table shows the significant assumptions used in connection with the determination of the fair value of options granted in 2019, 2020 and 2021:


	2019			2020	2021
Dividend yield	0.82%	—	1.08%	0.89%	0.84%	—	1.08%
Expected life (in months)	84			84	84
Risk-free rate of interest for expected life	1.56%	—	2.63%	1.50%	1.12%	—	1.37%
Volatility	21.00%	—	21.38%	20.96%	26.05%	—	26.18%

Volatility was calculated based on the historical volatility of the Company’s share price during a period equivalent to the estimated term of the option. The Company estimates the expected term of an option using the “simplified method,” which is based on the average of its contractual vesting term. The risk-free interest rate that the Company uses in the option valuation model is based on U.S. Treasury bonds with a term similar to the expected term of the options. The Company paid cash dividends of $0.0975 and $0.1075 per share in each quarter of fiscal 2020 and 2021, respectively.

The Company has issued, and intends to continue to issue, new common shares upon stock option exercises and the vesting of share awards under its equity-based incentive compensation plans.

18. Stock-based compensation (Continued)

A summary of stock option activity during the years ended December 31, 2019, 2020 and 2021 is set out below:


	Year ended December 31, 2019
	Shares arising out of options		Weighted average exercise price	Weighted average remaining contractual life (years)	Aggregate intrinsic value
Outstanding as of January 1, 2019	7,261,675		23.61	6.4	—
Granted	1,881,068		28.50	—	—
Forfeited	(85,000)		29.91	—	—
Expired	—		—	—	—
Exercised	(697,531)		15.33	—	18,724
Outstanding as of December 31, 2019	8,360,212		25.33	6.5	$	140,760
Vested as of December 31, 2019 and expected to vest thereafter (Note a)	8,006,985		25.18	6.5	$	136,017
Vested and exercisable as of December 31, 2019	3,111,039		19.16	3.4	$	71,584
Weighted average grant-date fair value of options granted during the period	$	6.98


	Year ended December 31, 2020
	Shares arising out of options		Weighted average exercise price		Weighted average remaining contractual life (years)	Aggregate intrinsic value
Outstanding as of January 1, 2020	8,360,212		$	25.33	6.5	—
Granted	431,924		43.94		—	—
Forfeited	(752,261)		30.09		—	—
Expired	—		—		—	—
Exercised	(692,634)		20.30		—	11,813
Outstanding as of December 31, 2020	7,347,241		$	26.41	5.7	$	110,925
Vested as of December 31, 2020 and expected to vest thereafter (Note a)	7,132,162		$	26.26	5.7	$	108,671
Vested and exercisable as of December 31, 2020	2,713,405		$	19.40	2.6	$	59,593
Weighted average grant-date fair value of options granted during the period	$	9.72


	Year Ended December 31, 2021
	Shares arising out of options		Weighted average exercise price		Weighted average remaining contractual life (years)	Aggregate intrinsic value
Outstanding as of January 1, 2021	7,347,241		$	26.41	5.7	—
Granted	1,831,180		43.98		—	—
Forfeited	(25,000)		31.50		—	—
Expired	—		—		—	—
Exercised	(1,145,125)		20.23		—	30,463
Outstanding as of December 31, 2021	8,008,296		$	31.30	6.1	$	174,428
Vested as of December 31, 2021 and expected to vest thereafter (Note a)	7,422,919		$	30.51	6.1	$	167,551
Vested and exercisable as of December 31, 2021	3,117,333		$	24.17	3.4	$	90,117
Weighted average grant-date fair value of options granted during the period	$	11.35

(a) Options expected to vest after considering an estimated forfeiture rate.

18. Stock-based compensation (Continued)

Cash received by the Company upon the exercise of stock options during the years ended December 31, 2019, 2020 and 2021 amounted to $10,690, $14,062 and $23,168, respectively. Tax benefits from the exercise of stock options during the years ended December 31, 2019, 2020 and 2021 were $2,966, $7,381 and $6,927 (including excess tax benefits of $2,743, $7,310 and $4,191), respectively.

As of December 31, 2021, the total remaining unrecognized stock-based compensation cost for options expected to vest amounted to $24,199 which will be recognized over the weighted average remaining requisite vesting period of 3.2 years.

Restricted Share Units

The Company has granted restricted share units, or RSUs, under the 2007 and 2017 Omnibus Plans. Each RSU represents the right to receive one common share. The fair value of each RSU is the market price of one common share of the Company on the date of grant. The RSUs granted to date have graded vesting schedules of three months to four years. The compensation expense is recognized on a straight-line basis over the vesting term.

A summary of RSU activity during the years ended December 31, 2019, 2020 and 2021 is set out below:


	Year ended December 31, 2019
	Number of Restricted Share Units	Weighted Average Grant Date Fair Value
Outstanding as of January 1, 2019	1,528,999	$	27.45
Granted	470,939	37.58
Vested (Note b)	(672,025)	26.84
Forfeited	(66,207)	30.43
Outstanding as of December 31, 2019	1,261,706	$	31.41
Expected to vest (Note a)	1,149,286


	Year ended December 31, 2020
	Number of Restricted Share Units	Weighted Average Grant Date Fair Value
Outstanding as of January 1, 2020	1,261,706	$	31.41
Granted	296,332	40.40
Vested (Note c)	(640,212)	28.28
Forfeited	(57,518)	37.35
Outstanding as of December 31, 2020	860,308	$	36.44
Expected to vest (Note a)	762,877

18. Stock-based compensation (Continued)


	Year ended December 31, 2021
	Number of Restricted Share Units	Weighted Average Grant Date Fair Value
Outstanding as of January 1, 2021	860,308	$	36.44
Granted	466,702	44.00
Vested (Note d)	(501,273)	34.41
Forfeited	(66,230)	38.02
Outstanding as of December 31, 2021	759,507	$	42.29
Expected to vest (Note a)	654,594

(a)RSUs expected to vest after considering an estimated forfeiture rate.

(b)637,933 RSUs that vested during the period were net settled upon vesting by issuing 521,707 shares (net of minimum statutory tax withholding). 34,092 RSUs that vested in the year ended December 31, 2019 were issued during the period ended December 31, 2021.

(c)590,699 RSUs that vested during the period were net settled upon vesting by issuing 385,197 shares (net of minimum statutory tax withholding). 49,513 RSUs vested in the year ended December 31, 2020, shares in respect of which will be issued in 2022 after withholding shares to the extent of minimum statutory withholding taxes.

(d)461,640 RSUs that vested during the period were net settled upon vesting by issuing 300,944 shares (net of minimum statutory tax withholding). 39,633 RSUs vested in the year ended December 31, 2021, shares in respect of which will be issued in 2022 after withholding shares to the extent of minimum statutory withholding taxes.

As of December 31, 2021, the total remaining unrecognized stock-based compensation cost related to RSUs amounted to $18,045, which will be recognized over the weighted average remaining requisite vesting period of 2.3 years.

Performance Units

The Company also grants stock awards in the form of performance units, or PUs, and has granted PUs under both the 2007 and 2017 Omnibus Plans.

Each PU represents the right to receive one common share at a future date based on the Company’s performance against specified targets. PUs granted to date have vesting schedules of six months to three years. The fair value of each PU is the market price of one common share of the Company on the date of grant and assumes that performance targets will be achieved. PUs granted under the plan are subject to cliff vesting. The compensation expense for such awards is recognized on a straight-line basis over the vesting term. During the performance period, the Company’s estimate of the number of shares to be issued is adjusted upward or downward based upon the probability of achievement of the performance targets. The ultimate number of shares issued and the related compensation cost recognized is based on a comparison of the final performance metrics to the specified targets.

18. Stock-based compensation (Continued)

A summary of PU activity during the years ended December 31, 2019, 2020 and 2021 is set out below:


	Year ended December 31, 2019
	Number of Performance Units	Weighted Average Grant Date Fair Value		Maximum Shares Eligible to Receive
Outstanding as of January 1, 2019	3,712,402	$	28.40	3,712,402
Granted	1,579,109	34.68		3,158,218
Vested (Note b)	(3,276)	27.47		(3,276)
Forfeited	(248,031)	29.04		(278,755)
Adjustment upon final determination of level of performance goal achievement (Note c)	1,018,260	34.72
Adjustment upon final determination of level of performance goal achievement (Note d)				(530,125)
Outstanding as of December 31, 2019	6,058,464	$	31.07	6,058,464
Expected to vest (Note a)	5,507,640


	Year ended December 31, 2020
	Number of Performance Units	Weighted Average Grant Date Fair Value		Maximum Shares Eligible to Receive
Outstanding as of January 1, 2020	6,058,464	$	31.07	6,058,464
Granted	1,253,766	42.49		2,507,532
Vested (Note e)	(1,496,377)	25.21		(1,496,377)
Forfeited	(539,670)	33.77		(560,867)
Adjustment upon final determination of level of performance goal achievement (Note f)	(399,987)	42.60
Adjustment upon final determination of level of performance goal achievement (Note g)				(1,632,556)
Outstanding as of December 31, 2020	4,876,196	$	34.56	4,876,196
Expected to vest (Note a)	4,573,356


	Year ended December 31, 2021
	Number of Performance Units	Weighted Average Grant Date Fair Value		Maximum Shares Eligible to Receive
Outstanding as of January 1, 2021	4,876,196	$	34.56	4,876,196
Granted	1,340,877	44.06		2,681,754
Vested (Note h)	(1,784,140)	30.66		(1,784,140)
Forfeited	(258,258)	39.97		(320,098)
Adjustment upon final determination of level of performance goal achievement (Note i)	408,480	43.99
Adjustment upon final determination of level of performance goal achievement (Note j)				(870,557)
Outstanding as of December 31, 2021	4,583,155	$	39.40	4,583,155
Expected to vest (Note a)	4,263,803

(a)PUs expected to vest are based on the probable achievement of the performance targets after considering an estimated forfeiture rate.

18. Stock-based compensation (Continued)

(b)PUs that vested in 2019 were net settled upon vesting by issuing 2,151 shares (net of minimum statutory tax withholding).

(c)Represents a 66.67% increase in the number of target shares expected to vest as a result of achievement of higher-than-target performance for PUs granted in 2019 partially offset by an adjustment made in March 2019 to the number of shares subject to the PUs granted in 2018 upon certification of the level of achievement of the performance targets underlying such awards.

(d)Represents the difference between the maximum number of shares achievable and the number of shares expected to vest under the PU awards granted in 2019 based on the level of achievement of the performance goals. Also includes an adjustment made in March 2019 to the number of shares subject to the PUs granted in 2018 upon certification of the level of achievement of the performance targets underlying such awards.

(e)Vested PUs in the year 2020 were net settled upon vesting by issuing 902,532 shares (net of minimum statutory tax withholding).

(f)Represents a 32.98% decrease in the number of target shares expected to vest as a result of achievement of lower-than-target performance for PUs granted in 2020, partially offset by an adjustment made in March 2020 to the number of shares subject to the PUs granted in 2019 upon certification of the level of achievement of the performance targets underlying such awards.

(g)Represents the difference between the maximum number of shares achievable and the number of shares expected to vest under the PU awards granted in 2020 based on the level of achievement of the performance goals. Also includes an adjustment made in March 2020 to the number of shares subject to the PUs granted in 2019 upon certification of the level of achievement of the performance targets underlying such awards.

(h)1,784,140 PSUs that vested during the year 2021 were net settled upon vesting by issuing 1,102,440 shares (net of minimum statutory tax withholding).

(i)Represents a 31.20% increase in the number of target shares expected to vest as a result of achievement of higher-than-target performance for PUs granted in 2021, partially offset by an adjustment made in March 2021 to the number of shares subject to the PUs granted in 2020 upon certification of the level of achievement of the performance targets underlying such awards.

(j)Represents the difference between the maximum number of shares achievable and the number of shares expected to vest under the PU awards granted in 2021 based on the level of achievement of the performance goals. Also includes an adjustment made in March 2021 to the number of shares subject to the PUs granted in 2020 upon certification of the level of achievement of the performance targets underlying such awards.

As of December 31, 2021, the total remaining unrecognized stock-based compensation cost related to PUs amounted to $58,752, which will be recognized over the weighed average remaining requisite vesting period of 1.8 years.

Employee Stock Purchase Plan (ESPP)

On May 1, 2008, the Company adopted the Genpact Limited U.S. Employee Stock Purchase Plan and the Genpact Limited International Employee Stock Purchase Plan (together, the “ESPP”). In April 2018, these plans were amended and restated, and their terms were extended to August 31, 2028.

The ESPP allows eligible employees to purchase the Company’s common shares through payroll deductions at 90% of the closing price of the Company’s common shares on the last business day of each purchase interval. The dollar amount of common shares purchased under the ESPP must not exceed 15% of the participating employee’s base salary, subject to a cap of $25 per employee per calendar year. With effect from September 1, 2009, the offering periods commence on the first business day in March, June, September and December of each year and end on the last business day of the subsequent May, August, November and February. 4,200,000 common shares have been reserved for issuance in the aggregate over the term of the ESPP.

During the years ended December 31, 2019, 2020 and 2021, 264,440, 315,245 and 285,657 common shares, respectively, were issued under the ESPP.

The ESPP is considered compensatory under FASB guidance on Compensation-Stock Compensation.

18. Stock-based compensation (Continued)

The compensation expense for the ESPP is recognized in accordance with the FASB guidance on Compensation—Stock Compensation. The compensation expense for the ESPP during the years ended December 31, 2019, 2020 and 2021 was $1,083, $1,299 and $1,420, respectively, and has been allocated to cost of revenue and selling, general, and administrative expenses.