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Evaluating and Negotiating Job Offers
Part 5 – Employee Stock Purchase Plan
(This is part 5 of the series on Evaluating and Negotiating Job Offers. You may also find these other parts of interest: Part1: Base Salary, Part2: Signing Bonus & Relocation Benefits, Part3: Stock Options, Part4: 401K, Part6: Other Perks).
The next aspect we look at is the Employee Stock Purchase Plan.
What is the Employee Stock Purchase Plan?
An Employee Stock Purchase Plan is offered by some of the employers, where the employees may contribute some percentage of their paycheck, after tax deductions, to buying company stocks at a discounted rate. Usually the discount is around 15%. The employees' contributions are held in a no/low interest holding account for the holding period, usually 6 months. At the end of the holding period, the employee will be granted stocks for the amount of money he/she has contributed. The neat advantage of this is that you get an easy, guaranteed 15% return on your contribution, if you sell your stock immediately.
The discounted price of the stock is usually computed based on the minimum price of the stock on two days, the first day of the offering period and the last day of the offering period. So, if your company stock has increased during the offer period, then you can make a profit, in addition to the 15% discounted price.
The Gotchas:
When you sell the stocks, you will incur taxes on the gains. You may also be assessed fees for the transactions.
Depending on the job role, you may be placed on the "restricted employees" or "insider trading" list. In such a case you will not be able to unload company stocks at will. So, if your job functions are related to company finances or includes inside knowledge, you may want to speak with the HR about all the different caveats of your stock purchase and options.
Setting your expectations:
Not all companies offer the Employee Stock Purchase Plan. So, don’t be disheartened if your offer package does not mention it.
Negotiation:
This is usually not negotiable. Either the company offers it, or not. However, folks with multiple offers SHOULD use this while calculating the value of their whole package for comparing the different offers.
Please stay tuned for the last post in this series that discusses annual bonus, insurance benefits, paid vacation and other perks.
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