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Global Work Glossary

Lost in a maze of global employment jargon? Find your way out with our handy collection of work and HR terminology

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# A B C D E F G H I J L M N O P R S T U V W X Y Z

ESOPs

What does ESOP refer to?

ESOPS (Employee Stock Ownership Plans) are programs that allow employees to become partial owners of a company. The purpose is to align the interests of employees with those of the wider organization, encouraging motivation and good performance.

An ESOP works by allowing the company to set up a trust fund. This means that employees can become shareholders in the company without having to make a direct financial investment. They are set up in a way that promotes retention because the more years an employee works at a company, the more their stake increases.

ESOPs can be a powerful tool for enhancing employee engagement. When employees see a direct correlation between their efforts and the company’s performance, they are often more motivated. They are also beneficial for tax as they are deductible for C-corporations and tax-free for S-corporations.

However, ESOPs are also complex to manage. Proper communication and education about the ESOP structure are crucial to ensuring that employees understand the benefits and responsibilities associated with ownership. This can be done through an effective onboarding process facilitated by strong HR software such as Multiplier. Our digital platform allows you to curate offer letters, include benefits, add an options plan, and more.

Ready to take the leap? Choose Multiplier as your EOR partner

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