Employee Stock Option Plan (ESOP)

Employee Stock Option Plan or ESOP consists of ESOP Scheme, ESOP vesting letter and ESOP grant letter and subsequent allotment of shares to the designated beneficiary. ESOP Scheme is a carefully drafted document which provides for the eligibility for the beneficiaries of the ESOP scheme. Shares under the ESOP is allotted to only those beneficiaries/employees who fulfill the eligibility criteria under the ESOP scheme. Shares under ESOP is generally offered to eligible employee at heavily discounted price, which is like an incentive paid to an employee for exemplary performance or good loyalty towards the company.

ESOP has dual benefit for the company. Due to the benefits the employee receives, he works better and longer in the company. His continuous good work increases the profit of the company and due to which the value of the company's share increases.

Later employees can earn profits by selling the company's stock. The company does not need to give extra incentives in the form of cash to its employees. In this way, ESOP benefits both the company and its employees.

The process

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