The exact usage policy might differ from one organisation to the other, but the generally the organisation fixes a minimum period, after which these stocks can be liquidated at Market price. Nowadays, most companies offer ESOPs to their employees. The advantages of the plan are as follows:
The employees feel that they are more closely linked to the company. The company’s stock performance becomes important for them personally. Hence, this is a great way to connect the company and the individual employee.
It is generally also awarded as a reward for good work by the employee.
It also acts as a retention tool, as the employee having ESOPs would be enticed to stay longer if he is expecting good returns on his shares after some time.
For start-up companies, who do not have much money in the beginning ESOP become an alternative to very high salaries