ESPP Example: $85K Salary

This segment breaks down a numerical example of how Employee Stock Purchase Plans (ESPPs) work in practice. While ESPPs may offer modest financial gains, they remain a valuable benefit—especially at companies that don't provide RSUs.

• Basic Example: With an $85,000 base salary, contributing the maximum 10% ($8,500) into an ESPP with a 15% discount allows purchase of 100 shares at $85/share when market price is $100/share—equating to $10,000 worth of stock.
• Annual Gain: This results in an immediate $1,500 gain, illustrating the perk's effective “free money” nature through discounted stock purchasing.
• Complex Structure: Though ESPPs involve layers such as salary withholding, fund accumulation, and exercise schedules, the benefit is relatively straightforward once broken down.
• Limited Upside: Because ESPPs are tied to salary and offer a modest discount, the overall financial impact is smaller than RSUs—yet still meaningful.
• Prevalence at Non-Big Tech Companies: Many companies, particularly outside top-tier tech, offer ESPPs instead of RSUs. For example, PayPal provided only ESPP (no RSUs) to new grads eight years ago.