Here are five smart things to know about Employee Stock Option Plan (ESOP):
- ESOP is a programme for employees where they can own equity shares of the company they work for and participate in its growth. Companies use ESOP to attract and retain talent.
- ESOP gives the employee the option to buy a certain number of shares in the employer’s company at a pre-determined price known as the exercise price.
- ESOP can be exercised only after a defined time called vesting period. This is to ensure that the employee’s contribution is aligned to the ESOP benefits.
- Exercising the options would result in a gain for the employee if the market price of the stock is more than the exercise price after vesting.
- ESOPs enable a variable benefit to the employee and passes on the gains in the value of the equity shares of the company to the employees.
Source : http://articles.economictimes.indiatimes.com/2015-04-13/news/61102997_1_equity-shares-employee-stock-option-plan-esop