Understanding ESOP – Employee Stock Options Plan [Whiteboard Friday]

Equity sharing with employees is proving to be a great tool for both employers & employees. In this episode of eLagaan Whiteboard Friday, the eLagaan team explains details about ESOP (Employee Stock Options Plans), also commonly know as stock options or options.

The video talks about:

  • Difference between sweat equity & ESOP
  • ESOP Policy
  • Vesting of shares – Vesting period, vesting schedule
  • Can this be given to just employees or consultants/mentors/advisers
  • Excercise period
  • Cliff
  • Grant letter
  • Structuring your ESOP
  • Giving ESOP to International employees
  • Giving ESOP to indian employees (by foreign company)
  • How to deal with FDI

ESOP can be a great tool for companies to entice best talents, however if not done right it can become a pain point (read: The dark side of ESOPs) and may not achieve the right goals. It can also have sever tax consequences for your employees and may become a nightmare instead of perk. We recommend that you spend enough time and resources to come up with the right ESOP structure and policy.