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What Are Employee Share Options?

Employee share options are schemes under which a specific number of shares, issued at a fixed price, are granted to employees that they have the right to purchase at some point in the future at the price that was set when they were granted. They are usually granted to employees as part of an incentive scheme. The reasoning is that if the employee contributes to the success of the company in the period between when the options were granted and when they can be exercised, their value will have grown and the employee receives the difference as a bonus.

Employees can generally exercise their share options after a specified period called the vesting period. Sometimes share options are also issued subject to certain conditions such as achieving certain targets or making a set number of sales. They are different to share schemes where employees receive shares directly rather than an option to buy.