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ESOP is short for Employee Stock Option Plan. Companies provide their employees the option of purchasing stock in the company at reduced rates. The employee has the purchase price of the stock shared deducted from their income. http://taxresolutionaries.blogspot.com
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What has the author Jared Kaplan written?
Jared Kaplan has written: 'ESOPS in corporate transactions (Corporate practice series)'
What are the benefits of having an ESOP plan?
An employee stock ownership plan (ESOP) has a wide variety of benefits. For examples, large studies have shown that ESOPs improve employee benefits and performance.
What has the author Robert D Hamrin written?
Robert D. Hamrin has written: 'America's new economy' -- subject(s): Economic conditions, Economic policy 'Managing growth in the 1980's' -- subject(s): Economic conditions, Economic forecasting, Economic history 'Broadening the ownership of new capital, ESOPs and other alternatives' -- subject(s): Employee ownership, Stock ownership, Stocks
What is the meaning of Employees stock option plan?
An Employee stock option is a call option on a company's own stock issued as a form of non-cash compensation. A stock option granted to specified employees of a company. ESOPs carry the right, but not the obligation, to buy a certain amount of shares in the company at a predetermined price. When the employees exercise their stock options, shares would be issued and thus, outstanding shares would increase.
How could an esop motivate employees?
ESOPs, employee stock ownership plans, are a retirement plan where employees are allocated shares of the company they work for into their retirement account. When the company does better and increases in value, so does the employee's retirement account. There is a direct correlation to company performance and employee rewards. Research (see NCEO, ESOP Association, ESCA, Verit website, or other) has shown that companies with employee ownership out perform companies without employee ownership. Employees feel like their contributions make a difference, productivity and morale improves.
What is the structure of Indian financial markets?
Hi this is Sandeep Kanoi from Mumbai. I am a Chartered Accountant in Practice from Mumbai. This website is created by me to provide free updates to Chartered Accountants, Company Secretaries, Tax Professional, Cost Accountants and other Account Professional on Amendments in Income Tax, Welath Tax, MVAT, Company Law, Service Tax, ICAI Regulation, Fema etc. We update our reader with latest News on these which includes recent Circular, Notification, Amendments, and Case Laws etc. We are providing all these for free. We are also proving various useful tools and Forms related to above laws in excel and word format. * Granting of power to the assessing officer to extend the time for completion of special audit under sub-section (2A) of section 142 * Deemed payment of tax by the employee where FBT on securities (ESOPs) allotted to him is recovered by the employer * Explanation on Relief in respect of tax on distributed profits of domestic companies * For Calculation of Book Profit u/s. 115JB profit need to be increased by deferred tax and the provision thereof, if debited to profit and loss account * Partnership firms & Other Non Corporate Bodies have to abide by AS 11: ICAI * Now You can pay your stamp duty at Post Office * Form 17 is applicable only for payment of tax deducted or collected at source on or after 1st April 2009 * BJP promises Income Tax exemption up to Rs 3 lakh * ICAI - Announcement Relating to AS-11 * KPMG faces $1-bn law-suit in America for negligence in Audit for more such posts visit www.taxguru.in
What are typical investment banking fees?
Overview of Investment Banking Fees and Issues Companies considering using an investment banker for the first time often question the high fees and value of such services. However, it's not just the fee amount that should concern companies. Several common engagement practices often work against the best interests of the Company and its equity holders. Typical Investment Fees and Approach Investment banking fees often include three components: an upfront or monthly retainer, a cash fee paid upon closing and additional equity compensation. Most investment bankers charge fees that equate to between 3% and 10% of the total capital raised. The larger the capital raise the more lucrative the fees become even though it's the same amount of work involved. For this fee the banker will typically develop a business plan, solicit investors, receive proposals (called 'term sheets'), negotiate proposals and help the company close the transaction. Common Conflicts In practically every investment banking engagement, there are two contractual approaches which almost always create conflicts of interest between the investment banker and company seeking to raise capital. Fees vary based on the type of capital raised - Advisors that raise capital on a percentage basis usually charge two to three times the percentage fee to raise equity capital versus debt capital. Most bankers charge a fee of 1-3% for debt and between 5% to 10% for equity capital raised. This difference in percentages creates a strong incentive for an advisor to recommend or guide a client towards equity sources over debt sources. In addition to doubling or tripling the investment banking fee paid by the company, it can needlessly dilute the owners' equity. Additional Equity Compensation - In addition to significant cash fees, most investment banking fees include equity compensation. Most equity compensation is paid in the form of warrants. Warrants are generally a number of shares equal to 5% to 10% of the number of shares sold by the investment banker. The warrants usually have an exercise price equal to 100% of the price of the securities sold in the deal. Under this approach, the banker actually has more upside from the value of his warrants the lower the valuation of the business is at the time of the capital raise. In short, bankers have an incentive to complete a deal but necessarily at the terms that are best for the company. Other things to avoid Over the years, we have heard all sorts of schemes for raising capital. Smaller companies are particularly vulnerable. The best way to guard against poor advice is to use common sense. Avoid overly complex schemes or approaches you don't understand. Also, be leery of 'one trick ponies' that only have expertise in one type area such as reverse mergers, ESOPs and even bankruptcies. Chances are their advice will always lead back to their specialty whether or not that's the best approach for your company. The ideal approach All bankers say they have good intentions and integrity. The key is to make your contractual agreement match their good intentions. The easiest way to do that is to eliminate all variable based pricing and equity compensation and pay bankers an attractive all-cash fee based on a successful funding. Should your investment banker become an on-going advisor, equity compensation may make sense for both parties but you can best determine that after the initial engagement is complete. Ultimately, investment banking fees should be based on a successful completion of the project, as is the case with any other project. The best advisors strive to deliver not just one financing proposal but a variety of financing options that gives a client an opportunity to pick their best option. When bankers deliver a variety of financing alternatives for a reasonable total cost, clients perceive the value delivered to be far greater than the fees paid. Overview of Investment Banking Fees and Issues Companies considering using an investment banker for the first time often question the high fees and value of such services. However, it's not just the fee amount that should concern companies. Several common engagement practices often work against the best interests of the Company and its equity holders. Typical Investment Fees and Approach Investment banking fees often include three components: an upfront or monthly retainer, a cash fee paid upon closing and additional equity compensation. Most investment bankers charge fees that equate to between 3% and 10% of the total capital raised. The larger the capital raise the more lucrative the fees become even though it's the same amount of work involved. For this fee the banker will typically develop a business plan, solicit investors, receive proposals (called 'term sheets'), negotiate proposals and help the company close the transaction. Common Conflicts In practically every investment banking engagement, there are two contractual approaches which almost always create conflicts of interest between the investment banker and company seeking to raise capital. Fees vary based on the type of capital raised - Advisors that raise capital on a percentage basis usually charge two to three times the percentage fee to raise equity capital versus debt capital. Most bankers charge a fee of 1-3% for debt and between 5% to 10% for equity capital raised. This difference in percentages creates a strong incentive for an advisor to recommend or guide a client towards equity sources over debt sources. In addition to doubling or tripling the investment banking fee paid by the company, it can needlessly dilute the owners' equity. Additional Equity Compensation - In addition to significant cash fees, most investment banking fees include equity compensation. Most equity compensation is paid in the form of warrants. Warrants are generally a number of shares equal to 5% to 10% of the number of shares sold by the investment banker. The warrants usually have an exercise price equal to 100% of the price of the securities sold in the deal. Under this approach, the banker actually has more upside from the value of his warrants the lower the valuation of the business is at the time of the capital raise. In short, bankers have an incentive to complete a deal but necessarily at the terms that are best for the company. Other things to avoid Over the years, we have heard all sorts of schemes for raising capital. Smaller companies are particularly vulnerable. The best way to guard against poor advice is to use common sense. Avoid overly complex schemes or approaches you don't understand. Also, be leery of 'one trick ponies' that only have expertise in one type area such as reverse mergers, ESOPs and even bankruptcies. Chances are their advice will always lead back to their specialty whether or not that's the best approach for your company. The ideal approach All bankers say they have good intentions and integrity. The key is to make your contractual agreement match their good intentions. The easiest way to do that is to eliminate all variable based pricing and equity compensation and pay bankers an attractive all-cash fee based on a successful funding. Should your investment banker become an on-going advisor, equity compensation may make sense for both parties but you can best determine that after the initial engagement is complete. Ultimately, investment banking fees should be based on a successful completion of the project, as is the case with any other project. The best advisors strive to deliver not just one financing proposal but a variety of financing options that gives a client an opportunity to pick their best option. When bankers deliver a variety of financing alternatives for a reasonable total cost, clients perceive the value delivered to be far greater than the fees paid. Additional places to see examples of investment banking fees and the expected fees for a capital raise: www.lanternadvisors.com/investment_banking_fees.html
What are the welfare schemes provided the company?
= EMPLOYEE COMPENSATION =incentive plan - Find an Incentive Reward Program For Your Company Online Here. (www.IncentivePlan.net)Recognition Certificates - Easy Recognition Certificates See Examples. Try it Free! (www.SmartDraw.com)Employee incentive - Online Reward & Incentive Programs Free For Small & Medium Companies. (SparkPeople.com/Healthy_Employees) Compensation is a primary motivator for employees. People look for jobs that not only suit their creativity and talents, but compensate them-both in terms of salary and other benefits-accordingly. Compensation is also one of the fastest changing fields in Human Resources, as companies continue to investigate various ways of rewarding employees for performance. It is important for small business owners to understand the difference between wages and salaries. A wage is based on hours worked. Employees who receive a wage are often called "non-exempt." A salary is an amount paid for a particular job, regardless of hours worked, and these employees are called "exempt." The difference between the two is carefully defined by the type of position and the kinds of tasks that employees perform. In general, exempt employees include executives, administrative and professional employees, and others as defined by the Fair Labor Standards Act of 1938. These groups are not covered by minimum wage provisions. Non-exempt employees are covered by minimum wage as well as other provisions. It is important to pay careful attention to these definitions when determining whether an individual is to receive a wage or a salary. Improper classification of a position can not only pose legal problems, but often results in employee dissatisfaction, especially if the employee believes that execution of the responsibilities and duties of the position warrant greater compensation than is currently awarded. When setting the level of an employee's monetary compensation, several factors must be considered. First and foremost, wages must be set high enough to motivate and attract good employees. They must also be equitable-that is, the wage must accurately reflect the value of the labor performed. In order to determine salaries or wages that are both equitable for employees and sustainable for companies, businesses must first make certain that they understand the responsibilities and requirements of the position under review. The next step is to review prevailing rates and classifications for similar jobs. This process requires research of the competitive rate for a particular job within a given geographical area. Wage surveys can be helpful in defining wage and salary structures, but these should be undertaken by a professional (when possible) to achieve the most accurate results. In addition, professional wage surveys can sometimes be found through local employment bureaus or in the pages of trade publications. Job analysis not only helps to set wages and salaries, but ties into several other Human Resource functions such as hiring, training, and performance appraisal. As the job is defined, a wage can be determined and the needs for hiring and training can be evaluated. The evaluation criteria for performance appraisal can also be constructed as the specific responsibilities of a position are defined. Other factors to consider when settling on a salary for a position include: * Availability of people capable of fulfilling the obligations and responsibilities of the job * Level of demand elsewhere in the community and/or industry for prospective employees * Cost of living in the area * Attractiveness of the community in which the company operates * Compensation levels already in existence elsewhere in the company There are many federal, state, and local employment and tax laws that impact compensation. These laws define certain aspects of pay, influence how much pay a person may receive, and shape general benefits plans. The Fair Labor Standards Act (FLSA) is probably the most important piece of compensation legislation. Small business owners should be thoroughly familiar with it. This act contains five major compensation laws governing minimum wage, overtime pay, equal pay, recordkeeping requirement, and child labor, and it has been amended on several occasions over the years. Most of the regulations set out in the FLSA impact non-exempt employees, but this is not true across the board. The Equal Pay Act of 1963 is an amendment to FLSA, which prohibits differences in compensation based on sex for men and women in the same workplace whose jobs are similar. It does not prohibit seniority systems, merit systems, or systems that pay for performance, and it does not consider exempt or non-exempt status. In addition, the United States government has passed several other laws that have had an impact, in one way or another, on compensation issues. These include the Consumer Credit Protection Act of 1968, which deals with wage garnishments; the Employee Retirement Income Security Act of 1974 (ERISA), which regulates pension programs; the Old Age, Survivors, Disability and Health Insurance Program (OASDHI), which forms the basis for most benefits programs; and implementation of unemployment insurance, equal employment, worker's comp, Social Security, Medicare, and Medicaid programs and laws. For the most part, traditional methods of compensation involve set pay levels (wage or salary) with regular increases. Increases can be given for a variety of reasons, but are typically given for promotions, merit increases, or cost of living increases. The Hay Group points out that there is less distinction today between merit increases and cost of living increases: "Because of the low levels (3 to 4 percent) of salary budget funding, most merit raises are perceived as little more than cost of living increases. Employees have come to expect them." This "base pay" system is one that most people are familiar with. Often, it includes a set salary or wage, a set schedule for merit increases, and a set benefits package. Benefits are an important part of an employee's total compensation package. Benefits packages became popular after World War II, when wage controls made it more difficult to give competitive salaries. Benefits were added to monetary compensation to attract, retain, and motivate employees, and they still perform that function today. They are not cash rewards, but they do have monetary value (for example, spiraling health care costs make health benefits particularly essential to today's families). Many of these benefits are nontaxable to the employee and deductible by the employer. Many benefits are not required by law, but are nonetheless common in total compensation packages. These include health insurance, accidental death and dismemberment insurance, some form of retirement plan (including profit-sharing, stock option programs, 401(k) and employee stock ownership plans), vacation and holiday pay, and sick leave. Companies may also offer various services, such as day care, to employees, either free or at a reduced cost. It is also common to provide employees with discounted services or products offered by the company itself. In addition, there are also certain benefits that are required by either state or federal law. Federal law, for example, requires the employer to pay into Social Security, and unemployment insurance is mandated under OASDHI. State laws govern worker's compensation. As businesses change their focus, their approach to compensation must change as well. Traditional compensation methods may hold a company back from adequately rewarding its best workers. When compensation is tied to a base salary and a position, there is little flexibility in the reward system. Some new compensation systems, on the other hand, focus on reward for skills and performance, with the work force sharing in company profit or loss. One core belief of new compensation policies is that as employees become employee owners, they are likely to work harder to ensure the success of the company. Indeed, programs that promote employee ownership-and thus employee responsibility and emotional investment-are becoming increasingly popular. Examples of these types of programs include gain sharing, in which employees earn bonuses by finding ways to save the company money; pay for knowledge, in which compensation is based on job knowledge and skill rather than on position (and in which employees can increase base pay by learning a variety of jobs); and incentive plans such as employee stock options plans (ESOPs). PAY FOR PERFORMANCE Probably the most popular of the newer concepts in compensation is the easiest to understand-compensation based on performance. These programs, sometimes referred to as variable pay programs, generally offer compensation incentives based on employee performance or on the performance of a team. Pay for performance rewards high performance and does not reward mediocre or low performance, and is the definition of the "merit" system. In a true merit based system, there are a few conditions which must be satisfied for it to be meaningful: * Employees must have control over their performance. If employees are overly dependent on the actions and output of other employees or processes, they may have little control over their own performance. * Differences in performance must mean something to the business. If there is little difference between a high performer and a mediocre one, merit pay won't work. * Performance must be measured regularly and reliably. A clear system of performance appraisal, with defined criteria that are understood by the employee and regularly scheduled meetings must be in place. Compensation programs and policies must be communicated clearly and thoroughly to employees. Employees naturally want to have a clear understanding of what they can reasonably expect in terms of compensation (both in terms of monetary compensation and benefits) and performance appraisal. To ensure that this takes place, consultants urge business owners to detail all aspects of their compensation programs in writing. Taking this step not only helps reassure employees, but also provides the owner with additional legal protection from unfair labor practices accusations.
