ESOP Payouts Surge 30% to ₹15,000 Crore in FY25

In FY25, companies in India significantly increased their Employee Stock Option Plans (ESOP) payouts, with the total expenditure rising by 30% to ₹15,000 crore. This is a marked jump from ₹11,461 crore spent in FY24, according to data from the Centre for Monitoring Indian Economy (CMIE). 

The surge reflects a growing trend of employee ownership programmes, allowing staff to share in the company’s success.

Non-Financial Firms Lead the Surge in ESOP Spending

Non-financial companies were the primary drivers behind this rise, reporting a 34% increase in ESOP expenses to ₹9,326 crore in FY25. This rise indicates a strong focus on employee retention and reward mechanisms, especially in sectors outside of finance. Companies in industries like technology, manufacturing, and retail have increasingly adopted ESOPs as a means to align employee interests with business growth.

Financial Sector’s Contribution to the ESOP Surge

Financial firms also saw a notable increase in ESOP payouts, although at a slightly slower rate. The total expenses of financial companies rose by 23.8%, amounting to ₹5,573 crore in FY25. This growth is reflective of the sector’s increasing dependence on equity-based compensation, as firms seek to attract and retain top talent in a competitive environment.

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The Growing Popularity of ESOPs

Employee Stock Option Plans have become an essential tool for companies to retain skilled workers, particularly in competitive sectors like technology and finance. The surge in ESOP expenses comes at a time when employee compensation models are evolving, with more firms recognising the long-term benefits of employee ownership schemes. By offering a stake in the company, ESOPs incentivise staff to contribute towards the company's growth and success, aligning their goals with those of the business.

Conclusion

The 30% increase in ESOP payouts to ₹15,000 crore in FY25 highlights the growing trend of employee ownership across sectors in India. Non-financial companies led the charge, while the financial sector also saw a substantial rise in ESOP expenses. As companies continue to use ESOPs as a tool to drive employee engagement and retention, this trend is likely to continue in the coming years.

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