Employee Stock Purchase Plan

Quick Summary of Employee Stock Purchase Plan

A program that allows employees to purchase company stock at a discount to its fair market value.

An Employee Stock Purchase Plan gives an employee the opportunity to purchase stock in the company where they work. Many companies offer an Employee Stock Purchase Plan and encourage employee participation. An Employee Stock Purchase Plan may be part of a qualified retirement plan or simply be a benefit offered by the company. The share purchase price for purchases through an Employee Stock Purchase Plan can be as much as 15% below market price. In addition, many companies offer a lookback provision. In this type of Employee Stock Purchase Plan, if the stock price increases during the plan offering period, Employee Stock Purchase Plan participants buy shares at the lower price from the beginning of the period. The typical Employee Stock Purchase Plan also offers favourable tax treatment. No income is reported when shares are purchased for an Employee Stock Purchase Plan even if shares are acquired below market price. In addition, an Employee Stock Purchase Plan is not subject to the alternative minimum tax. The typical Employee Stock Purchase Plan requires employees to sign up by a particular date then withholds money from their paychecks for stock purchases.

Examples of Employee Stock Purchase Plan in a sentence

You may want to try and offer a ESPP to your workers so that they can grow their funds with the business.

As an employee, I use the ESPP to purchase company stock, this allows me to buy stock at a discount and also feel like I have ownership in the company.

As a part of his employment, bill was offered ESPP. The amount was automatically deducted from his paycheck for the purchase, but could not exceed 10% of his income.

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