Employee Share Option Scheme (ESOS) offers employees with the option of owning a certain portion of the organization’s shares at a predetermined price for a specific period of time, known as the vesting period. The pre-determined price is often called the exercise price, thus, employees who are granted share options profit by exercising their options to buy shares at the exercise price when the shares are valued or trading at a price that is higher than the exercise price.
The benefits of an Employee Share Option Scheme include:
- Increasing loyalty and reducing staff turnover
There is no gainsaying that the long-term success of any company is largely hinged on the quality of its staff, and their loyalty. When employees do not feel happy at the work place, there is a likelihood that loyalty becomes diminished and staff turnover rises at a significant cost.
The ESOS creates an opportunity for employees to be committed to the company’s success as their share value is dependent on company performance. This eventually engenders loyalty and brings about a sense of ownership, alignment of employee-employer long-term interest, thereby reducing employee turnover.
- Attraction and retention of valuable employees
Recruitment of talented employees are intangible capital investments that a firm must make in achieving its business goals. As a result, an ESOS is a viable means of attracting and retaining top talent by providing employees with an opportunity to help build something which they are part of.
- Motivates employees to become more productive
Successful businesses thrive when their employees are productive. The feeling of having an ownership stake in a company creates an atmosphere of responsibility by employees geared towards the company’s vision. This ultimately helps the company achieve its corporate and financial goals.