ESOP Employee Stock Ownership Plan

Employee stock ownership plan originated in the USA in early nineties. Such plan did not gain popularity in India till recently, due to the absence of legal provisions in the Companies Act covering stock options. However in 1988, the government allowed stock options to software professionals, recognizing the importance of retaining talent within the country

 Under this plan, the eligible employees are allotted companys shares below the market price. The term stock option implies the right of an eligible employee to purchase a certain amount of stock in the future at an agreed price. The eligibility criteria may include length of service, contribution to company may even permit employees to pay the price of the stock allotted to them in installments or even provide them advance money, to be recovered from their salary every month.

 The allotted shares are generally held in trust and transferred to the name of the employee whenever he or she decides to exercise the option. The stock option empowers the employee to participate in the growth of the company as a part owner. It also helps the company to retain talented employees and make them more committed to the job.

Merits of ESOP
For the employer Employees remain loyal and committed to the company It motivates them to do well and share the fruits of progress Better industrial relations, reduced employee turnover, and less supervision are other incidental benefits

For the employee

He or she becomes a part owner, sharing dividends, bonuses and other benefits like any other shareholder If the stock appreciates, he or she gains substantially

Benefits
Benefits are indirect financial and no financial payments an employee receives. They include health and life insurance, vacation, pension, education plans and child care facilities. They represent an important part of every employees pay. Offering these benefits is becoming increasingly difficult as the workers are more sophisticated and demanding, and also because some benefits need to comply with laws.

Fringe Benefits
These are extra benefits provided to workers other than the usual compensation paid in the form of wage or salary. These benefits are referred to as fringe benefits because many years age, they were small, relatively inconspicuous, or fringe components of compensation. But along with times, they have also grown.

They are now a part of a comprehensive compensation package which is offered by the employer to the employees

Payment for the time not worked

This is a type of fringe benefit. This category includes hours of work and paid holidays. Hours of work: Section 51 of the Factories Act 1948 specifies that no adult worker shall be required to work in a factory form more than 48 in any week Section 54 of the Act restricts the working hours to a maximum of nine on any day. In some organization, the number of working hours is less than the legal requirement.

 Paid Holidays: According to the Factories Act 1948, an adult worker shall have weekly paid holidays, preferably Sunday. When a worker is deprived of weekly holidays, he is eligible for compensatory holidays of the same number in the same month.

Some organizations allow the workers to have two holidays in a week.

 Health benefits - various medical services such as a hospital, clinical and dispensary facilities are provided by organizations not only to employees but also to their family members Sickness Benefit : Insured employees are entitled to a cash benefit for a maximum of 56 days in a year under this benefit Maternity benefit : Insured women employees are entitled to maternity leave for 12 weeks (six weeks before the delivery and six weeks after the delivery) in addition to a cash benefit of 75 paisa per day or twice the sickness benefit, whichever is higher. Disablement benefit: Insured employees, who are disabled temporarily or permanently (partial or total) due to employment injury, occupational diseases, or both are entitled to a cash benefit under this head. A disability plan provides income replacement for the employee who cannot work due to illness or accident. These plans are either short-term or long-term. They can be distinct from workers compensation because they provide benefits for non-workrelated illness or injury.