What is an employee stock option plan (ESOP)?
An Employee Stock Option Plan, or ESOP in short, is a special type of employee benefit. It is usually offered in large companies, especially when an external investor enters into the company. However, the stock option plan is gaining popularity among smaller companies. Czech companies, wishing to fight to retain their key employees, are eagerly turning to this type of benefit.
As an additional form of employee remuneration, the stock option plan allows employees to purchase shares (stocks) of the company at a fixed price, which is usually lower than the standard fair market value. In some companies, these shares are also granted for free to further motivate employees.
Employee´s stock option plan – what are the main benefits?
There are many advantages of implementing an ESOP in an organisation. Certainly, one of the key merits of a stock option plan is the retention of key employees, and thus an increase in employee retention rates even in the long run.
However, there are many more benefits of an ESOP. It is not only the employees who gain, the organisation that has opted for this solution benefits first and foremost. Companies using a share option plan experience an increase in shareholder value, all thanks to the greater commitment of those participating in the plan. Other benefits are also worth mentioning, for example greater maturity of the organisation, and a better ESG profile.
Czech Republic – employee stock option plan – how can we help
ESOP plans will become increasingly popular in the Czech market in the near future. However, each ESOP plan is different and involves different tax consequences. Therefore, it is worth starting with a discussion of assessing the feasibility of implementing the benefit in an organisation and designing a tailor-made programme to avoid potential problems that an inappropriate approach may bring.
This is why our team, in response to the needs of the market, has developed a service to facilitate the implementation of this particular type of employee benefit. Our consultants will discuss the pros and cons of the project and identify the most advantageous solution for your company.
As part of the ESOP service we will:
- help prepare, together with our legal partners, the entire plan for your entity
- help you work out how to configure the various parts of the plan.
- prepare tax documentation regarding the impact of the plan on your employees,
- prepare and indicate the tax guidelines
- offer a series of in-house training sessions to answer all your questions.
