In a recent LinkedIn post on ESOPs, a workplace situation sparked a debate when an employee resigned, leaving his manager frustrated.
“We gave him a raise!” the manager argued.
“No, “the HR representative corrected. “We offered him more ESOPs, not a salary increase.”
The employee’s departure emphasizes a simple truth: stock options don’t always meet immediate financial needs.
“Doesn’t he see the potential? If the company does well, those ESOPs could be worth a fortune!” the manager insisted.
“He understands,” HR replied, “but his landlord won’t accept future value for rent. He needed cash now, and he found a company that could provide it.”
This situation brings up an important point. While ESOPs can be a way to build wealth over time, they don’t replace the need for a stable paycheck.
Highlights
- ESOPs depend on company performance, making their future value uncertain.
- Employees with financial commitments often prioritize a reliable salary over stock options that may or may not pay off.
The Bottom Line: If companies want to keep top talent, they need to offer more than just potential future rewards. A mix of competitive pay and stock options ensures employees feel secure—both now and in the future.
What do you think? Are ESOPs overrated, or do they help companies retain their best employees? Let’s see HR professionals’ comments.
HR Experts Comments
Commenting on this post Saurabh Sinha said, “Balancing your compensation mix will only be able to retain talent. HR and Management need to sit and brainstorm for individual critical talent which will boost morale and inspire and keep employees excited for future wealth creation as well. It’s observed ESOP as barter to competitive salaries has not worked well in retaining high performers”
Sharing his opinion Venkattesh R said, “It is never either or Compensation models are based on a holistic approach rather than through a piecemeal approach. This is structured according to the level, business segment and the impact the role has.”
“The higher you go, the higher the percentage of long-term rewards in relation to the fixed component. The Compensation Philosophy needs to be in sync with the business outcomes, the organization is looking for.” He added.
He further said, “Yes, it sounds crazy when a manager reacts this way to his team member’s resignation but I guess it is precisely the role of management along with Human Resources team to embed the philosophy. It is a reality today when you are young and moving more towards earning tomorrow’s spend today culture, one can’t ignore the practical aspects of the higher fixed component of rewards.”
Commenting on this post, Milind Mutalik said, “ESOPs are a valuable benefit for employees when the organization has a strong and sustainable market position. However, their role has evolved, especially with startups using them as a key offering, sometimes as a substitute for competitive salaries, which can be a concern.”
He added, “Larger, well-established companies have traditionally provided ESOPs as a long-term, loyalty-based benefit for select employees. In these cases, the approximate value was clearer, making ESOPs more of an additional perk rather than a gamble on future success.”
“With the changing use of ESOPs, employees often find themselves weighing their options—“Is a bird in the hand better than two in the bush, or is this truly the hen that will lay the golden egg in the future?” He further said.
For more interesting and informative HR experts’ comments, please read the LinkedIn Post.
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