Name: ESPP Explainer With Tips On How To Navigate It
Uploaded: 2022-05-02T11:48:59+00:00
Duration: 2 min 30 s
Description: This section explains the Employee Stock Purchase Plan (ESPP), a more traditional and common form of stock-based compens

ESPP Explainer With Tips On How To Navigate It

This section explains the **Employee Stock Purchase Plan (ESPP)**, a more traditional and common form of stock-based compensation compared to RSUs. ESPPs are typically found at companies outside the top-tier tech firms and offer employees a way to invest in their employer's stock at a discount.

- **What ESPP Is:** ESPP allows employees to purchase company stock at a discounted rate—usually 10% to 15% off the market price—using a portion of their base salary.
- **How It Works:** Employees allocate up to 10% of their salary into a fund, which is periodically used to buy company shares. Unlike RSUs, employees pay to acquire the shares.
- **Tax Implications:** The discount is considered taxable income because it's effectively a financial gain (e.g., buying $100 stock for $85 means $15 in taxable benefit).
- **Differences from RSUs:** RSUs grant a fixed number of shares, regardless of stock price fluctuations, while ESPP is tied to monetary investment and stock price dynamics, often using an average price over time.
- **General Advice:** Though the gains may be smaller and the system slightly more complex, ESPP is considered “free money” and is worth maximizing when financially feasible.

This section explains the Employee Stock Purchase Plan (ESPP), a more traditional and common form of stock-based compens

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