E-commerce platform, Flipkart, has created an Employee Stock Ownership Plan of (Esop) Rs.1700 cores, which places company top among India’s technology firms which have allocated stock options to staff.

It has been a record year for Esops across Indian start-ups as more companies adopted buyback programs to enrich the employees. Flipkart’s Rs. 600 crore buyback is one of the largest this year.

ShareChat, entered the unicorn club in April, placed an Esop pool of Rs 462 crore. Consumer tech firms Zomato and Nyka have had largest Esops pools in the year. Zomato’s stock market debut spawned $ 18 million.

Pallavi Nautiyal, Regional Head, Qapita says, “vesting schedules also often do not match the pace of business growth, as startups are becoming unicorns within months. Stock options are talent currency. From the employees’ perspective – rather than being a lottery – stock options are hard-earned currency awarded against actual performance, risk-taking and opportunity cost. This needs to be the guiding principle embedded in the design and implementation of Esops so that they are transparent, concrete and predictable.”

“Repeat taxation – in the form of perquisite tax at the time of exercise – and capital gains tax at the time of liquidation are other problems,” Nautiyal adds.

Abhishek Goyal, Co-founder, Tracxn says, “When employees exercise their stocks, they have to pay taxes immediately on the notional gains. It takes companies a while to implement their Esop policy – since it is not a trivial thing and there are many tax nuances around it. And people who leave before that, there is no way to allow them to exercise options.”

“Even with the hurdles, Esops are set to gain in popularity in the coming year and a primary way to compensate people .So far in India, employees were always looking for fixed salary as per market benchmarks and Esops were usually a cherry on top. Now that many people have seen their Esops being cashed out, there will be an increasing trend where people would accept lower fixed salaries against higher Esop components, and this trend further aggravates the need to bring policy around Esops and in some ways also checks bad behaviour,” Goyal adds.