Employees Stock Ownership Plan (or ESOP) is emerging as a game-changer in the race for top talent. On the one hand, employees benefit from a plan that supports stock ownership. On the other, employers benefit by using it drive productivity and loyalty. However, they must navigate the legal and tax implications to leverage the potential of ESOPs.
At greytHR’s Parichay webinar, CS Bhanu Bhargav, an expert in legal and financial solutions, shared key insights on the tax and legal nuances of employee stock options in India. The session concluded with a dynamic Q&A, offering leaders a deeper understanding of how this valuable tool can fuel organizational growth.
Here are the highlights of this insightful session: 👇
What are ESOPs?
An ESOP is an employee stock option plan in which employees are given the right to purchase company shares at a predetermined price, usually low, to motivate them and align their interests with the success of the company.
The Perks of ESOPs
For Employers:
- Attract and Retain Talent: ESOP helps draw and keep top talent in competitive markets.
- Boost Motivation and Productivity: Ownership drives morale and performance.
- Increase Company Value: Engaged employees contribute to innovation and growth.
For Employees:
- Wealth Creation: ESOP offers potential financial growth as the company grows.
- Increased Motivation: Shared ownership boosts engagement and contributions.
- Better Retirement Planning: The employee stock option adds to retirement savings.
How ESOPs Work
| Scheme Finalization | Granting of Option | Vesting of Option | Exercise of Right |
|---|---|---|---|
| The company offers shares through an ESOP Scheme approved by Shareholders. | Employees gain the right to buy shares at a fixed price over time. | Employees must complete a minimum of one year between grant and vesting to claim benefits. | After vesting, employees can buy shares at the pre-determined price. |
Key ESOP Terms
- Stock Option
- ESOP Pool
- Grant
- Grant Date
- Vesting
- Exercise
- Exercise Price
- Expiry Date
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