Share-based incentive plans are an integral part of an organisation's reward strategy as they show immediate desired results such as retention, enhanced performance of employees, an EY report said.
According to EY India's latest Share Based Incentive Plan Report, 94 per cent of the organisations surveyed have a share-based incentive plan in place.
Traditional employee stock option plan (ESOP) remains the most preferred share-based employee incentive plan and about 71 per cent of the respondent organisations have implemented ESOP.
Apart from ESOP, other variants of share-based incentive plans such as stock appreciation rights plan (SAR) are preferred by 13 per cent of respondent companies and is often rolled out by cash-rich companies where dilution of equity may be a concern, the report said.
"Almost 50 per cent of the organisations feel that share-based incentive plans have shown immediate desired results such as retention and enhanced performance of employees," said Sonu Iyer, Tax Partner and National Leader, People Advisory Services, EY India.
About 87 per cent of the respondents issued fresh shares, the report said, adding that market price is most preferred as the exercise price, with 52 per cent of the respondents offering shares to employees at market price of share as on the date of grant.
Besides, most organisations (77 per cent) do not impose a lock-in period post allotment of shares and most listed firms (78 per cent) prefer sale over stock exchange as an exit strategy.
As per the report, employers need to review the share-based incentive plan periodically to ensure appropriate changes are made to keep the plan attractive for employees and to meet objectives of the organisation.
The survey was aimed at understanding trends and practices with respect to share-based incentive plans followed by Indian organisations and multinational organisations operating in India.
This survey was conducted online and through personal interviews covering a representative panel of 80 senior level respondents, involved in decision-making with respect to the share-based incentive plans.
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