In this video, we discuss what are ESOPs or Employee Stock Options Plan, how it works, why companies opt for them, and their benefits.
What is ESOP?
ESOP is a part of an employee benefits program where an employee gets to hold a part or some shares of a company. The idea is to put the Employees in the shoes of owners to keep hold of the best employees.
How does the whole process of ESOP Work?
ESOPs are structured in a way so that employees can access or exercise them over a period of three to six years. The process generally goes through the phases such as:
- Grant date- When you are given the details of stock options and your entire stock account balance.
- Vest Period- This stage generally lasts for 3 to 6 years depending on what kind of vesting provisions employees choose.
- Exercise - Once the Vesting period is complete, ; ItIt helps then employees have the power of either selling their stock options immediately or holding on to the right time before they decide to sell them.
Why do Companies go for ESOP?
- Helps them to hire and retain top talents.
- Grants them many tax benefits
- Can be used as a financial tool to pay debts or expand the business.
What Benefits do Employees Get?
- Can help in boosting the private wealth of employees.
- Ensures job security and satisfaction.
We also discuss some of the critical questions that surround ESOPs like:
- When do companies generally plan for the ESOP
- What happens to the ESOP once the company is acquired or when an employee decides to quit.
- Are ESOPs worth it?
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