Employee options , why they are great for start-ups and employees
This article is written to cater for both employers and employees that wish to have an oversight on the concept of employment options. An employer may want to give employee(s) options as part of a remuneration package and subsequently some employees have come across employee options as part of their remuneration package.
What are employee options?
An employee option is a contract that allows an employee to purchase stocks of the company at a certain (fixed) price over a certain period. Do note that employee option are capped. Therefore you can only purchase a certain volume of stocks that are subject the terms of the employee option agreement.
The employees benefits of employee options
The benefit of employee options is that as an employee you are often offered stocks in the company at a lower rate than the market value. Furthermore if you purchase or subscribe to the stocks in terms of the agreement and there value appreciates you will be able to earn a healthy return.
The employer’s benefit of employee options
1.You will be able to incentivise your employees to go the extra mile.
When you offer employee options to your employees you are giving them skin in the game. The options will give them a great incentive to see the company perform well as this would have a positive impact on the value of their stock options.
2.Will aid cashflow.
Tech start-ups in particular are a fan of offering stock options and much of it has to do with addressing cashflow in the business. Employee options can offer as a healthy compensation in a remuneration package.
If you want to learn more about offering you employee stock options follow the link ().
- You can used employee options to recruit, compensate and retain top talent employees,
- To allow later employees to share in the company’s long-term upside.
- They can be offered to venture capitalist to raise capital.
Therefore to conclude employee options can prove to be mutually beneficial and therefore as an employee or employer you should consider to utilise them to reap their potential benefits.