If you were wondering how your techie friends
manage to live the lifestyle you have never even
imagined, the reason would be Employee Stock
Options (ESOPs), as they are called. The ESOPs have
over the three years steadily gained ground in the
country to reward extraordinary talent in the
organization. While IT industries were the initial
adopters of ESOPs, they are now a given form of
compensation in several employee-centric industries.
The flexible ESOP scheme comes in handy to attract and
retain the employees who would like to look for greener
pastures outside. They are the options granted to
employees to sell their shares after a stipulated time
period, but at a price announced today. These
instruments give employees the opportunity to be a coowner
of the organization they work for.
In India, the concept was initiated by the leading IT
major, Infosys Technologies in 1994. Now many
companies across sectors such as real estate, aviation,
banking and financial services are offering ESOPs to
their employees. The attractive offer of ESOPs is to
inculcate higher motivation, improve employee
performance and realign employees’ interest with
shareholders’. “ESOPs are an ideal way of acknowledging
the good work done by employees and sharing the wealth
we have created with their help,” says Sridhar Ganesh of
Director of Human Resources in Murugappa Group. In an
economy currently facing talent crunch, ESOPs are an
ideal tool. Although there is attractiveness while treading
this path to wealth, inevitably there exists a tax too. On
April 1, 2007, the government stated that ESOP gains
were a fringe benefit and hence were liable to the Fringe
Benefit Tax (FBT). Thus, employees are required to pay
about 34% of tax while exercising their stock options.
When this move was announced last year in the country, |
