Achal Chaurasia– All about Employee Stock Ownership Plans

What are employee stock ownership plans?

The employee stock ownership plans, abbreviated as Es Ops are economic benefit generating plans for employees which are intended to encourage them to acquire stocks in the company.

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These finance-related plans offer employees to have ownership interests in the organizations they are working with. Some stocks are specially labeled and retained for the employees to invest in and then later extract financial benefit out of it.

How do ESOPs work in India?

The ESOPs provide golden opportunities to experience gains, growth, and financial benefits to employees equitably as the company.

Eligibility for ESOPs

Every employee having more than or equal to 10% equity in the company except the directors and promoters are eligible for being a part of employee stock ownership plans.

Introduction of Employee Stock Ownership Plans in India

Employee stock ownership plans have been introduced in the Indian corporate and multinational sector back from the time when international companies made an entry into the Indian job and finance markets.

How do ESOPs benefit Employees?

Employees are presented with a fair chance of getting formally and economically involved in the company. Employees are clear with whatever the company owes them at the time of leaving or retiring from the job and therefore, no confusion or dilemmas occur.

The stance of the employee stands clear in front of the respective organization and so is the case vice-versa.

The employer perspective

Economic stability and security

Presenting employees with an opportunity to get ESOPs in the company provides a safety guard and stability for the company itself.

In case the company faces financial losses and is unfortunately on the verge of getting dissolved at any point

The stocks purchased by the employees are known to be secure in the hands of the very own people of the company and therefore, sometimes, reversal and resilience from such difficult situations become easy.

Promotes growth

Selling off the shares to an organization’s employees will help in keeping the precious economic resources intact in the hands of the experienced workers, therefore, they will be more careful and considerate in dealing with situations as they will have their assets at stake, this will improve decision making and therefore, aid the company to grow positively.

Fostering strong employee-employer relationships

As the bond levels up a bit from being just a work give and take stage to the economic resources management stage, the kind of relationship between the employee and the employer becomes stronger than ever. Thus, promoting the ideas of unity and integrity.

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Enhancing company image

As the relationships between the employees and employers become better, unity, integrity, and collective action become the ideals that are uplifted at all times, the external image and picture of the company or organization in front of outsiders get enhanced, thus, inviting better prospects for the growth of the company.

Conclusion

Companies always try to find ways in which good employees remain faithful and intact, ESOPs provide a great opportunity to build this idea forward.

Similarly, an employee too hardly wants to quit working in a company that provides great working experience and gives amazing opportunities to gain advantage from, therefore, such stock ownership plans can pose wonderful mutual benefits.

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Author-Achal Chaurasia

A young businessman who has been in the line of entrepreneurship for quite a few years. He is an active learner and loves to know more about new technological developments coming up as well as how they can be put to great use to yield better results for society.