ESOP: As Thomas A. Edison rightly said, ‘There is no substitute for hard work’, rewarding such hard work is the least an employer could do. The employers or organizations in the past awarded cash bonuses to the employees who out-performed in their jobs. Later on, the scenario has evolved from cash bonuses to offering the company’s stake to the employees.
In the recent past, various incentive options are framed based on the working conditions of the organizations. ESOPs have been growing rapidly in the recent past time and so, our government had urged to regulate such issue and included the issue of ESOPs in tax and corporate laws and also the accounting of such issue of ESOPs is to be done according to the Ind AS framed by ICAI, the Chartered Accountants Chapter of India.
The employee incentive schemes are pertinent to private and public companies and some options can only be issued by public limited corporates only. The different types of employee incentive schemes introduced are:
- Employee Stock Option Plan (ESOP)
- Employee Stock Purchase Plan (ESPP)
- Stock Appreciation Rights (SAR) – cash or equity-settled
- Restricted Stock Units
- Phantom stock
Experts would recommend the above plans after a thorough study of the corporate structure, business model, cash flows, the management about which incentive plan would be effective.
We at Numbro would help you to manage the ESOP administration in it’s entirety as the compliances to be followed for an ESOP program are not trifle to handle.