Employee Stock Ownership Plan (ESOP)

How Does an ESOP Work?

What Is an Example of an ESOP?

Are ESOPs Good for Employees?

The Bottom Line

Not all ESOPs are the same. Rules on actions such as vesting and withdrawals can vary, and it’s important to be aware of them to make the most of this benefit and not potentially miss out on a big extra bonus.


  • An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers ownership interest in the company in the form of shares of stock.
  • ESOPs encourage employees to give their all as the company’s success translates into financial rewards.
  • They also help staff to feel more appreciated and better compensated for the work they do.
  • Companies typically tie distributions from the plan to vesting, which gives employees rights to employer-provided assets over time.
  • It’s important to read the terms of your ESOP, as each one may vary and have different rules.
  • Other versions of employee ownership include direct-purchase programs, stock options, restricted stock, phantom stock, and stock appreciation rights.



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