Employee Share Scheme is an attractive and profit-oriented investment option. It gives higher returns than other saving and investment instruments and is worthwhile for salaried employees with a regular income. ESS benefits can be enjoyed by both unorganized as well as organized sectors of the economy. ESS provides immense opportunities for people who are not executives but wish to enjoy the benefits of the company’s success.
Benefits of Employee Share Scheme
• Employee Share Scheme is a very attractive investment option for salaried employees with a regular income. It gives higher returns than other saving and investment instruments.
• Employee Share Schemes of listed companies are beneficial primarily because they provide an opportunity to get a business perspective of the company in which you work without risking your employment security. These schemes help you prepare yourself for later on becoming a promoter or director of a public limited company.
• In addition, there are tax advantages both at the time of investments as well as when you take out money from them after some years.
Purpose of Employee Share Scheme
The main objective of the employee share scheme is to motivate individuals working in reputed companies by providing them opportunities to become future part-owners of their organization. It is also meant for companies to capture the interest of employees by giving them an opportunity to earn higher returns on their investment than what they can get through conventional avenues. However, there are certain limitations with regard to who can invest in this scheme.
It is usually set up as a trust which has different kinds of investors called unitholders or participants that include current and past promoters, corporate bodies, banking institutes, mutual funds, etc. The main beneficiaries of these schemes are people working in reputed companies or entities intending to make investments in public listed companies. Basically, anyone who works in any company/organization, whether profit-making or not, can be a participant along with his family members irrespective of his/her income level.
Profits earned through the Employee Share scheme are exempt from tax. This scheme is ideal for salaried employees. It provides the opportunity to enjoy the company’s success without taking any business risk. Sometimes dividends may also be declared as part of these shares, subject to rules and regulations, which govern the equity market.
In conclusion, it can be said that ESS provides immense opportunities for people who are not executives but wish to enjoy the benefits of the company’s success.