GeneralHr Library

One minute guide: Employee stock option

Employee stock options (Esops) are plans under which an employee of a company is given the right to purchase shares of the company at a pre-determined price. Usually, the employee is required to wait for a certain period, known as the vesting period, to be able to buy shares issued under Esop. This plan is often used as a reward to motivate employees or as part of salary packages to ensure that employees stay with their respective organisations for long.

 

Esops are offered in two ways—shares are offered at a pre-determined price or at a discount to their fair market value (FMV) (usually determined by the company). In the latter case, the company would decide the date at which the employee can purchase the shares.

 

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