// form styles

Explaining ESOPs to employees

Spela Prijon
Thumbnail image for employee engagement use case
Jump to:
Ready to get started?

Why you need to explain your ESOP to your employees

The two ultimate goals of any employee participation plan are to award and engage startup employees.

Startup equity, however, is complicated and to make sure you can achieve these goals you should explain the plan thoroughly and clearly.

Most often the value of the plan is greater than what the employees recognize, so when you set up the employee participation plan, pay attention to how the benefits are perceived.

On the other hand, most of the employees don’t know what the procedure of receiving a grant looks like.

Empowering them in this process instills trust towards you as the employer, shows that you care and that you’re an expert in employee participation plans.

This post will help you prepare for the questions about participation plans that employees most often ask their employers.

Topics the employees most often wonder about:

1. General about the plan

  • The explanation of the participation plan: Stock options, virtual or phantom shares, warrants, etc.
  • What is dilution?
  • What is vesting?
  • When does the grant turn into cash?
  • What are the tax implications?
  • What happens when I leave the company?

You can find the answers to all of these in the free ebook.

2. Specifically about their grant

  • How many options/virtual shares do I have?
  • How long have I had them for?
  • How long until I own 100% of the grant?
  • What are the shares worth today?
  • How much do I have to pay for the grant?

How do companies and employees keep track of the grants?

Employee grants are tracked in the company cap table, however, that information is just for the eyes of the select few people.

Learn more about our cap table management software here.

Employees have to keep track of their grants in a different way. Some keep track of it by sending questions to the responsible person in their company, some have to track the grants themselves.

In Ledgy, for example, each employee can see their own employee dashboard which answers all of their questions about their grant.

Stay up to date! 🎉

Subscribe to our newsletter and receive the latest insights on the equity world