ESOPs: Companies expand pool in Covid times

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The second wave of the Covid-19 pandemic has brought devastation for many people. With many employees contracting the virus and working under stress, companies are trying to ease their woes by announcing various  compensation-related incentives and welfare measures. ESOPs, a popular way to attract and retain talent, are now being rolled out to employees to give them a sense of belongingness in these trying times.

What is ESOP?

It is an employee benefit plan that gives employees ownership in the company. It gives the employees opportunity to buy stocks in the company. Companies use ESOPs as a corporate-finance strategy to align the interests of their employees with those of their shareholders.

Companies

Paytm has expanded its ESOPs pool to $604 million from around $33.4 million in 2020. This has added more equity options to their existing pool. As per the company’s latest filings, it added 242,904 stock options to its existing pool, bringing the tally to around 2.4 million equity options. The company planned to use the additional shares to give more employees stock options during the annual performance appraisal exercise.

Cashify had also announced ESOP buyback plan worth $1 million. According to the plan, employees would be given the option to liquidate up to 35 % of their vested Employee Stock Options (ESOPs).

Swiggy had also initiated an ESOP liquidation program worth around $7-9 million to reward its employees. Many of their employees in 2020 enjoyed the opportunity to liquidate their ESOPs at up to thrice the premium of the allotted price.

Unacademy introduced its second ESOP buyback programme in December 2020. The ESOPs were availed for liquidation between 25%-100% by 145 of its current as well as former employees.

Zerodha also announced ESOP buybacks to all its employees on its 10th anniversary in September 2020. As many as 700 of its employees are claimed to have benefitted from the Rs 60-65 crore of buyback.

Bigger pool

Recently, IT bellwether Infosys also declared that it plans to deepen its employee stock options to include a larger pool of employees as the company takes up multiple measures to retain people.

“We already have ESOP (employee stock option) programmes today, which go to a lower level within the company, not at the entry-level, but a couple of levels above that. And that’s something which is a huge success for the company,” said Salil Parekh, CEO, Infosys.

Other IT companies such as Wipro, Tata Consultancy Services and HCL Tech have also introduced multiple initiatives to motivate and retain employees.