Employee stock option plans (ESOPs) are a type of corporate strategy for retaining and motivating employees. A company grants its employees the right to purchase a certain number of shares at a fixed price for a set number of years. To exercise the option, an employee must complete the vesting period. New generation companies are using ESOPs to retain highly skilled employees. Employees are more likely to pursue a long-term career in an extremely competitive IT sector when they feel a sense of ownership. Employees have the right to purchase shares at a predetermined price, but not the obligation.

To begin with, the mission is to retain employees, but ESOPs also aid in the reduction of cash compensation. By giving employees stock options, a company can save money to channel growth.