ESOP refers to employee stock ownership plan, under this the employee of the company are provided with shares of a company without any cost and therefore it may be regarded as part of salary or perquisite. Given below are some of the features of ESOP –
- In this scheme the employee cannot sell his or her stock immediately, there is some lock in period after which only an individual can sell, these lock in period varies from company to company.
- There also a minimum period of service which an employee should have done in order to be eligible for this plan, in other words not every employee gets this benefit as some people may leave the firm within 1 or 2 year which makes them ineligible for employee stock ownership plan.
- ESOP helps improving overall efficiency and productivity of people in the firm as they are now related to company in 2 ways that is as an employee and also as shareholder and therefore good performance of a company would be in their interest.
- Employee stock ownership plan are also beneficial with respect to tax purpose.
- In majority of the cases they are non-transferable and therefore an employee cannot transfer his or her shares to third person.