With employees working hard despite the slump in business due to the pandemic, companies like Unacademy, Zerodha, Meesho offered the ESOP buyback options to their employees as a way of showing their gratitude as well as incentivize them. ESOP is a way of letting employees know that they are a part of the company and it motivates them to work smarter.
What is ESOP buyback?
Under an ESOP buyback, employees holding vested ESOPs can sell their ESOPs to their company or employer. Startup companies may choose to buy back the ESOPs at a premium under specific instances. Employees get a chance to share the rich valuations and feel rewarded for their continued commitment. The buyback creates wealth for both the employer and employee.
Buybacks can easily be called a method of employee compensation by startups. The scheme is offered to improve pay packages thereby ensuring a higher employee retention rate, which is the biggest challenge faced by many startups today.
Two of our clients- PharmEasy and Swiggy have announced that they will be buying back their stocks from the employees as a way to support their families and as a way to deal with the operational losses caused by COVID -19.
Leading Health-Tech brand, PharmEasy has decided to buy back the stocks for around $3 million. With the competition increasing in the sector, with Amazon and Reliance entering the market, PharmEasy is using this as a wa`y to inculcate confidence within its employees. The buyback will benefit the early employees majorly. In the latest funding round in November 2019, PharmEasy raised $220 Million.
With FoodTech getting back to their feet after the lockdowns, Swiggy says that they’ve recovered by 80% with the food delivery services. To incentivize the employees, they will also be introducing the ESOP Buyback options. The buyback will benefit both current and former employees of the company. Some of them may profit about 3x from the initial price.