Facebook once paid their painter with shares instead of cash. Would you believe that those shares now value more than $200 million? Many people prefer taking stocks instead of money. Stocks provided by companies to the employees are known as Employee Stocks. Employee stock options are a decent option for perks if you are willing to take risks. Companies often provide opportunities to take shares instead of cash. Those shares can sometimes be more than your salary and can give you a large percentage of the company. But can companies pay in shares instead of cash? Is it a worthwhile option to take dividends instead of a regular salary? In some cases, people have become millionaires by taking shares, and some have seen severe pitfalls of company shares.
Understand and Know About Employee Stock Options :
Employee stock options are commonly known as ESOs. ESOs are shares or stocks that are given or provided to only individual employees by employers. Employee stock options are only given to those candidates who have a position in management, or they are at a very high-level position. These stocks only last a certain period. Stock options often come with expiration dates and must be exercised regularly. Otherwise, they expire and become worthless.
Benefits of Employee Stock Options :
Employee Stock Options bring substantial financial profits to the employees. Employees with higher-level ranks can merge their options into six-figure and seven-figure profits. It is seen that earnings from stock options sometimes exceed base salaries. In such cases, owners of stocks can earn for life unless the stock does not expire. An employee can become a millionaire just by stock options only.
In a growing company, the chances of achieving a high stock price are more. An employee can become a millionaire in no time. It is basically at the risk of the employee if he/she wants to take stocks or cash.
Risks of Employee Stock Options :
With an enormous profitable upside, ESOs come with some downside as well. As ESOs are the best option of trade, startups prefer paying via stocks only. This is because they are newbies in the market and can’t generate as much growth in cash to pay their employees. Even some companies fail to give market-level salaries and hence provide ESO as the payment option. However, if you accept such a risk as your payment, then beware. There are chances that the company or startup you work for may collapse. And with the collapse, you can expect a massive downfall in the stocks you received from the company.
Sometimes, even with the excellent output of a company, they can fail to rejuvenate stocks. A loan on the company or multi-year bear market can decrease the value of the stock price. Additionally, if the amount of stock does not recover before the expiry of stock, then the stock can become worthless.
Summary :
If you think you can take risks and accept stocks instead of a regular salary, then Employee Stock Options are a better game. You should be aware of the company’s situation, growth, and should be able to understand the business idea to sustain in the game of an Employee Stock Option.
