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Employee Rights Regarding Stock
| What are an employee’s rights regarding stock? Well the good news is that employee stock options are no long meant only for the higher echelons of a company. Today if a company sees talent, it is offering stock options as a way to retain employees. Whether it is a startup, blue chip or a manufacturing company, it is using employee stock options to motivate and retain its employees. |
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Nearly 10 years ago just 1 million U.S. employees had employee stock options. However, today over 14 million employees across U.S. have access to stock options and this statistic is according to the National Center for Employee Ownership. This speaks a lot about the popularity of employee stock options.
An employee stock option gives you the right to exercise certain number of shares of your company’s stock at a particular stated price over a certain period of time. Employee stock options can either be nonqualified stock or qualified stock options. Qualified stock options or incentive stock options as they are popularly called get special tax treatment. Usually incentive stock options are given to senior management while normal employees are given nonqualified stock options. If your employer allows it, you can transfer nonqualified stock options to your children or to a charity. It is normal to hold on to your stock options till the value appreciates so that you get maximum benefit from the increase in stock price.
Most employee stock options have an exercise period of 10 years. This means that 10 years is the maximum amount of time during which the stock options can be exercised. In the 10 years, there is a vesting schedule which means that you have to wait for a minimum period of time as stipulated in your contract with your employer before you can exercise your option.
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