Startups offer Esops to help employees

Equity Right

Startups offer Esops to help employees

Incidental to economic distress invited by COVID-19, some of India’s top startups are rendering additional stock options to their employees in order to retain them even after having performed reduction in salaries mandatorily or voluntarily both. Among others, one is Zomato, a well known food delivery chain. Other is “On Your Own Rooms” popularly known as the Oyo Rooms, next is Grofers, the grocery delivery startup, Bounce, known for offering dock-less scooters enhancing mobility, Paytm an e-commerce payment and shopping application.

Zomato was seen initiating a voluntary salary reduction scheme in April, offering those employees add on stocks in order to compensate their decreased pay cheques. According to the estimates, around 2,700 employees undertook voluntary pay cuts empathizing with the company’s situation.


Why Esops?

This decision is a rational one. Companies resorting to pay cuts will not remain appealing to employees who previously worked on high salaries, retaining the talent is a skill, during these tough situations, Esop can be the best possible option to engage employees if not for life but at least for a fixed tenure. According to the sources, Zomato is already having pool of untouched shares with it which they can now use to offer its employees. While others are managing from their founder’s holding in the organizations.

Grofers is backed by Soft Bank, helping it to increase the Esop pool. It is planning to enhance pool by an addition of $25 million, summing up to make it raise $60-70 million. Further, Paytm, Zomato and Oyo are known to have Esop pools ranging around 2.6% – 5.5% of their overall shareholding.

The companies are still deciding as to what ratio of compensation will be granted and what can be the best articulated Esop plan that they can come up with, for instance lower price or shorter lock-in periods since they are being issued in compensation to liquid cash. Paytm, has earlier announced that it is willing to offer Esop linked appraisal scheme this year. For which, it will keep aside Rs 250 crore in Esops to be offered to the target achievers, sincere and honest employees, high performers and fresh joinees of their organization.



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