What Are ESOPs and How Do They Work?
ESOPs , or Employee Stock Ownership Plans, are a unique and increasingly popular employee benefit in which employees become partial owners of the company they work for. ESOPs offer a way for employees to acquire shares of the company's stock, often as part of their compensation package. Let's explore what ESOPs are and how they work. What Are Employee Stock Ownership Plans ? ESOPs, or Employee Stock Ownership Plans , are a type of employee benefit plan that provides employees with an ownership interest in the company they work for. This ownership interest typically comes in the form of shares of the company's stock. ESOPs are designed to align the interests of employees with those of the company and its shareholders. Here's how ESOPs generally work: How ESOPs Work: 1. Establishment of the ESOP : The company sets up an ESOP trust, which holds the shares on behalf of the employees. The trust is a separate legal entity responsible for managing the shares and ensuring th...