📈 ESOPs’: A Slice Of The Big Pie to Make Employees Smile

Joining bonuses and trimming notice periods are a thing of the past. There’s a new tweak in hiring for employers that lets employees own a portion of the firm.

Employee Stock Ownership Plans or ESOPs are the new candy that employees love. How does it work?

Employers allocate a certain percentage of a firm’s stock shares to a qualifying employee. These ESOP shares are held in a trust structure where they remain for a particular period, called the vesting period.

Once the vesting period is over, employees then have the right to exercise their ESOPs, which were given to them at a lower price than the market value. The employer buys back employees’ stakes and returns them to the firm if the employee exits or retires.

Of course, it is the employers who get to decide the number of shares that can be offered, their price, and the beneficiary employees.

To take a few names, food delivery giant, Swiggy has offered its employees the option to receive liquidity of up to $23 million against their ESOPs under the Build Your Own Dollar (BYOD) program.

It’s a win-win — employees holding ESOPs get to create wealth as the company grows and gets to conserve cash rather than spending on joining bonus.

For rival Zomato, co-founder and CEO Deepinder Goyal’s ESOPs alone cost the company Rs. 387 Cr. That’s a heavy chunk!

Noble Note

The co-founder also shared that he would be giving away a chunk of his ESOP proceeds to the Zomato Future Foundation. The money would be used towards educating the delivery partners’ children. He also waived off his salary for all of FY22.

Mobile gaming unicorn Mobile Premier League (MPL) has also updated its ESOP policy of exercising vested options from 30 days (after exiting the company) to 10 years from the vesting date, which will remain validated after an employee’s exit.

Too long? Here’s a one-liner: Employers are moving toward compensation restructuring to include ESOPs amid the downturn; Swiggy and MPL are amongst the companies that have implemented ESOPs.

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