Providing Stock Options (ESOP) to Overseas Employees: Step-by-Step Instructions

Providing Stock Options (ESOP) to Overseas Employees: Step-by-Step Instructions

Employee Stock Options are considered to be an efficient measure concerning bringing up startups and companies about high growth. This is mainly done to attract and retain highly intellectual individuals, thus conserving top talent in the company. Thus, companies present an Esop Offer Guide to their employees and people willing to join their company. However, the Esop Offer Guide is just not limited to the Indian population but to overseas employees thus opening up a considerable amount of Esop Offer to Overseas Employees. This is a beneficial step as it opens up a huge platform for achievement and rewards and retains international talent. To enable you to do so, this blog will give you clarity about how to offer stock options (ESOP) to foreign employees.

Why is an Esop Offer Guide important?

An Esop Offer Guide attempts to bring out a proper idea about the Employee Stock Options and how much of it should be put into empowering the employees. An Esop Offer Guide not only gives an idea about how you should empower your employees but also lets you know about the various things required when planning an ESOP. This is the reason why an Esop Offer Guide comes in handy.

About Stock Options

A stock option (also referred to as an equity option) places the right of an investor to buy or sell at an agreed-upon price and date. However, it must be noted strongly that this option does not obligate the investor to do so. Numerous numbers of startups, private companies, and corporations place them ahead for compensation plans for prospective or upcoming employees. Stock options are generally brought forward by the company so that employees give their best to the company, which can be levelled up if they share a part in the company's success.

Stock options are not actual shares of stock as they are the right to purchase a designated amount of shares about a company at a fixed selling price, usually defined as grant price, strike price, or exercise price. If the value of the stock rises, with the purchasing price of the stock remaining the same, then one could make money. One can also choose to sell their purchased shares at a cost higher than what they used for purchasing the stock, which is why they are known as options.

Types of Stock Options

Stock options are of two types:

Incentive Stock Options (ISOs)

Incentive Stock Options are defined as stock options that are structured in a way that qualifies them under a section of tax law in the United States under Section 422. This doctrine of law gives the holders of ISO (Incentive Stock Options), that is, your employees, a tax break if they face certain conditions. However, this is limited to employees under the US laws of tax, and the other foreign tax systems fail to recognize such tax advantage.

Incentive Stock Options (ISOs) can only be granted to employees, thus disqualifying independent contractors. Therefore, employees rooted on international grounds are debarred from this structure of tax and contractors everywhere as they are not eligible. This is the reason why many companies choose not to have Incentive Stock Options, as it is generally easier to go with a different stock option structure. However, if you have full-time, invested, permanent American employees, you can go ahead with Incentive Stock Option Plans. 

Non-Qualified Stock Options (NSOs)

Concerning NSOs (Non-Qualified Stock Options), one usually must pay for exercising duties and selling the commodity. They are considered simpler and more common than incentive stock options (ISOs) as they do not meet the Internal Revenue Code requirements to qualify as ISOs. These stock options provide employees with the right within a fixed timeframe to purchase a set number of shares from their company. This may be offered as an alternative part of compensating the workers or a means of encouraging their perspective towards the company.

The best time to put a non-qualified stock option into exercise is when the share value is higher than the cost of exercising the option. However, it must be done before the option expires, further ensuring that the stock is more valuable than the cost of purchasing it.

What is the Internal Revenue Code?

The Internal Revenue Code (IRC) is the portion about the domestic portion of the federal statutory tax law in the United States. It falls under Title 26 of the United States Code (USC), and the IRC has 11 subtitles. This includes income taxes, employment taxes, coal industry health benefits, and group health plan requirements. The implementing agency of the Internal Revenue Code (IRC) is the Internal Revenue Service (IRS).

Punishment for violating the Internal Revenue Code (IRC)

The consequences for violating the Internal Revenue Code (IRC) are regulated under Chapter 75. The violation of the Internal Revenue Code can be treated as a crime or a civil offence as it depends on the tax category the taxpayer has evaded. Furthermore, it also considers the amount of money involved, and if discovered, the taxpayer may be fined a hefty sum and even imprisoned. 

How to offer Stock Options (ESOP) to foreign employees

Following are some of the steps in which you can set up an Employment Stock Ownership Plan (ESOP) for foreign employees in your company:

Decide the amount of stock you want to set aside for your employees

Deciding the amount of stock you want to keep aside for your employees is important, as some part of the stock must stay within the company so that it can be used for future endeavours. Therefore, before you decide to give your employee a particular amount of stock, confidently decide the amount.

Collaborate with your legal team.

Collaborating with your legal team is the second step you must not forget under any circumstances. Doing so will help you know about the circumstances that might come in when you place a share and also the doctrines, if any, with relation to a country where your business has its headquarters.

Confirm the countries in which you want to place your option forward

Confirming the number of countries you want to place your stock option forward is important as it will determine the amount of responses you get. This will also ensure that your company is gaining and retaining talent from other countries, thus broadening its prospects.

Consult an EOR to understand international ESOP opportunities

To get a proper understanding and clarity about international ESOP opportunities and the work culture that is prevalent there, consult an EOR (Employer of Record). Doing so will give you proper knowledge of the current international ESOP opportunities and help you understand what foreign employees expect on a large scale.

Follow the laws of the country where your business headquarters is

Ensure you follow the laws of the country where your business has one of its many or its main headquarters. Every country has a different law concerning dealing with the financial prospects of its country. Doing this will inform you about the laws and follow them, thus benefiting your company.

Determine the type of share to offer your international employees

Determining the type of share, which includes RSUs, VSOs, etc, is very important as it is an increasingly important compensation component for attracting the best overseas talent. Thus, take some time out and decide on the type of share you want to bestow upon a particular employee.

Manage your stock option plan.

Lastly, manage your stock option plan and pay special attention to what is expected of you. This is because it will decide whether the present foreign employees and other prospective employees will join hands with your company. Thus, keep a careful eye on the management of your stock option plan to attract the best international talent for your company.


Thus, these are the steps behind how you should provide stock option plans to overseas employees and attract the same, thus utilizing their talent. Keeping a thorough check of the plans and your surroundings will help you formulate the best stock option plan and offer competitive and equitable compensation packages for your employees.

To get more guidance with regards to formulating an ESOP Stock Option Plan concerning foreign employees, visit Especia.

FAQs (Frequently Asked Questions)

Can I sell my shares at a higher price than the amount I purchased from a company?

You have the right to sell your shares at a higher price than the amount you paid to possess the share from a company. This is because stock option plans do not have any rigid rules or obligations concerning the amount you need to sell your stock. This is entirely your decision, thus providing you with the right to sell our share at your own fixed price.

Can I place forward the same ESOP stock option plan for the other ten countries where I have my business headquarters?

You can do so as long as the taxation rules permit you to do so, as different regions have different ways of dealing with these plans. That is why you should consult your legal team to curb any discrepancy that might come forward when you place your ESOP Stock options.


Contact Us for ESOP Services, ESOP Plan Administration and ESOP Financial Services in Delhi, Noida, Gurgaon, and all across India: write to us at Or Call On :(+91)-9711021268 +91-9310165114

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