Home / Employee Stock Option Plan (ESOP)
Updated on 17 Jun 2021 9.00 AM IST | 4 min read
What is ESOP?
Employee stock option plan is the plan formulated to encourage employees to acquire ownership in the form of shares. In ESOP, the shares are allotted to the employees at a reduced rate than the current market rate. It is done by the companies to attract, motivate and retain the employees. It is basically a contract between a company & its employees that gives right to employees to purchase specific number of shares at a price lesser than the market price within a certain period of time. The fixed price at which the employee purchases the shares of the company is called the exercise price. In case company’s stock price falls below the exercise price, the company revalues the price immediately to retain their employees.
What Is Included In Our Package?
ESOP Glossary Terms
Who Is Entitled To ESOP?
The employees of the company are entitled to the ESOP but company specified certain criteria to make employees eligible for it. ESOP scheme can be claimed by –
Note – Promoters or directors holding more than 10 percent of the equity are not eligible for ESOP.
How An ESOP Works??
The step by step procedure of how an ESOP works is explained below –
Benefits Of Employee Stock Option Plan (ESOP)
Employee stock option plan offers benefits to the company as well as to employees who choose to exercise the option.
Benefits of ESOP For Company
Benefits of ESOP For Employees
ESOP offers several benefits to employees –
- Employee stock option plan brings various financial benefits to the employees of the company such as higher pay, overall wealth generation, other benefits etc.
- Employees feel more responsible towards the organization by holding the shares of the company. They also participate in the decision making process of the organization which make their attitude more positive towards the organization in future.
- After getting both monetary & non-monetary benefits from the organization. Employees feel more satisfied and more secured in job. Therefore, ESOP helps in satisfying the employees too.
Tax Implications Of ESOP
Disadvantages of Employee Stock Option Plan (ESOP)
- The liquidity benefits with ESOP’S is highly uncertain
- The company’s only hope for compensation is indirectly through increased liquidity and through tax advantage sometimes. Therefore, the risk for exercise remains for the same and this can make options riskier than normal stocks.
- There are still many unclear guidelines for valuation & accounting procedures of employee stock option plans (ESOP’S) in a company.
Employee Stock Option Plan (ESOP) FAQ’S
Latest News & Updates
- Jun 10,2121
- Jun 15,2021
- Jun 14,2021
GST Council Meeting Highlights: No tax on black fungus drug Amphotericin B; rates unchanged for COVID-19 vaccineJun 12,2021
- Jun 11,2021
- Jun 09,2021
- Jun 08,2021
Due date for deposit of Tax deducted/collected for the month of May, 2021. However, all sum deducted/collected by an office of the government shall be paid to the credit of the Central Government on the same day where tax is paid without production of an Income-tax ChallanJun 07th ,2021
Monthly GSTR 8 (Summary of Tax Collected at Source (TCS) and deposited by e-commerce operators) for May 2021Jun 10th ,2021
Monthly GSTR 7 (Summary of Tax Deducted at Source (TDS) and deposited) for May 2021Jun 10th ,2021
GSTR 6 (Details of ITC received and distributed by ISD) Monthly Filing Due Date for May 2021Jun 13th ,2021
Due date for issue of TDS Certificate for tax deducted under section 194-IA in the month of April, 2021Jun 14th ,2021
Due date for issue of TDS Certificate for tax deducted under Section 194-IB in the month of April, 2021Jun 14th ,2021