Stock Options

Written by Patricia Skinner
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Offering stock options to employees as an incentive is not a new idea. But it has gained considerable popularity, especially as more and more companies seek to attract first class personnel in a period of economic fluctuation. The concept of offering stock, and thereby part-ownership, to employees kills two birds with one stone.

More and more often, when you see job ads, they mention the perk of stock options. It must be an attractive pull, otherwise so many firms wouldn't be doing it. It's an excellent way, for example, of attracting and keeping skilled workers who are looking for something extra, apart from just a salary.

Exercising Stock Options

It offers employees a sense of security, which is what they seek, and it also encourages a sense of loyalty in employees, because after all, in a way they're working for themselves. This has an excellent effect all around, as there can hardly be a better incentive than total ownership. Because of the great potential for this kind of incentive plan, offering stock is no longer reserved for the top echelons of employees. Many companies allow anyone who works for them to buy stock at a reduced price.

Employer stock option plans give employees the right to buy a certain amount of stock, usually limited, in a certain amount of time and at a certain price. If you are an employee who has been granted stock options, make sure you familiarize yourself thoroughly with procedures of exercising your right to buy stock first, to make sure you're doing it right, particularly when it comes to taxes. Don't make the mistake of overstretching yourself financially, as you could actually be turning your opportunity into a loss.

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