ACRONYMS:
ESPP - Employee Stock Purchase Plan
An employee stock purchase plan (ESPP) is a company-run program in which participating employees can purchase company stock at a discounted price. Employees contribute through payroll deductions which build up between the offering date and the purchase date. At the purchase date, the company uses the employee's accumulated funds to purchase company stock on behalf of the participating employees.
ESOP - Employee Stock Ownership/Options Plan
An employee stock ownership plan (ESOP) is an employee benefit plan giving workers ownership interest in the company. ESOPs give the sponsoring company, the selling shareholder, and participants various tax benefits, making them qualified plans. Companies often use ESOPs as a strategy to align the interests of their employees with those of their shareholders.
RSU - Restricted Stock Units
A restricted stock unit (RSU) is compensation issued by an employer to an employee in the form of company shares. Restricted Stock units are issued to an employee through a vesting plan and distribution schedule after reaching required performance milestones or upon remaining with their employer for a particular length of time. RSUs give an employee interest in company stock but they have no tangible value until vesting is complete. The restricted stock units are assigned a fair market value when they vest. Upon vesting, they are considered income, and a portion of the shares is withheld to pay income taxes. The employee receives the remaining shares with the ability to sell them at their discretion.