How to Decide When to Offer Stock Options

A stock option plan can increase employee loyalty, attract new talent, reserve corporate cash, and used as an alternative to compensate employees. The stock option is only beneficial to your employees when the offer is attractive enough. Some industries need a little extra help in attracting new talent and this could be the answer.

Difficulty: Moderate

Instructions

1. Meet the criteria; a company must be a publicly traded corporation with promising stock to make this offer a feasible option for the employees to purchase.

2. Decide whether the corporation needs to preserve cash. Offer the stock option plan when the company needs to reserve its corporate capital. Choose this alternative package to compensate employees and permit them to purchase stock at a preset price later.

3. Consider stock option plan as an added bonus beyond the traditional salary offered. Provide a competitive compensation package and a stake in the company.

4. Create a program through stock options that will encourage employees to remain at the company. Give employees an attractive incentive to stay at the job, and be more loyal.

Tips & Warnings

• Stock option plans have a vesting period ranging from 1 year to 5 years. This means an employee must remain in the companies' employment for that minimum time before they are able to exercise their right to purchase stock at the reduced price.