Frequently asked questions
What is an Employee Stock Purchase Plan (ESPP)?
An Employee Stock Purchase Plan (ESPP) is a program that allows employees of a company to purchase shares of the company's stock at a discounted price.
How does an ESPP work?
Employees can contribute a portion of their salary to the ESPP, which is used to purchase shares of the company's stock at a discounted price. The discount is typically between 10-15% off the current market price. At the end of the offering period, the shares are distributed to the employees.
Who is eligible for an ESPP?
ESPPs are typically offered to all employees of a company, although eligibility requirements may vary by employer.
What are the benefits of participating in an ESPP?
The primary benefit of participating in an ESPP is the opportunity to purchase company stock at a discount, which can result in significant savings for employees. Additionally, ESPPs can be a valuable way for employees to invest in their company and potentially benefit from its growth.
Are there any tax implications associated with an ESPP?
Yes, there are tax implications associated with an ESPP. The discount received on the stock purchase is generally considered taxable income, and capital gains tax may apply when the shares are sold.
What happens to my shares if I leave the company?
If you leave the company, you may be able to sell your shares immediately or you may have to hold onto them for a specified period of time. The specifics of what happens to your shares when you leave the company will be outlined in your ESPP agreement.