Paytm’s Rs 250 Cr ESOP policy will help the fintech giant drive

In an effort to help employees stay motivated in the pandemic-ridden world, several top Indian startups such as OYO, Paytm, Zomato, and Grofers, over the last couple of months, have announced hefty employee stock ownership plans. Traditionally a wealth creation tool used by startups to retain top talent and offer incentives to senior executives, ESOPs have now become a way for companies to compensate employees in lieu of appraisals and amid salary cuts and furloughs.

This comes at a time when toplines and cash runways have taken a hit.    While companies like OYO Rooms, Zomato, and Bounce have offered ESOPs to serve as a salve for pay cuts employees underwent not long ago, fintech giant Paytm’s Rs 250 crore stock option plan based on performance has become the talk of the startup town for its innovativeness in keeping employees galvanized to its success.

The company’s revised ESOP policy rewards employees with shares on the basis of their overall performance and the achievement of annual targets, which they are encouraged to set themselves. Their performance against their targets is evaluated every quarter, and every goal achieved earns the employees a point, which, during the annual appraisal, is used to calculate the number of shares they are eligible for.

Paytm says its main motive behind the policy revision is to give its employees a sense of belonging and connection to the organisation, and that it does not believe that ESOPs should be a guaranteed perk, or an add-on to the salary.

    “If our employees have a feeling of ownership, they would be more motivated to align with the company’s vision and give their 100 percent. We strongly believe that ESOPs should be given on the basis of the performance of an individual, and not considered a guaranteed perk or an add-on to the salary. Linking it to the performance of our colleagues helps us getting the best out of them and also sets the benchmark for goal setting,” Rohit Thakur, Paytm’s Chief Human Resources Officer

At present, more than 1,000 existing employees of Paytm have Rs 2,800 crore in ESOPs, while close to 150 have earned over Rs 650 crore after vesting.    The fintech giant said it recently gave its oldest and most trusted employee, who manages its pantry and other administrative operations, stock options as a way to show its appreciation for his long-standing service and commitment.

Still, even though ESOPs are a great way to get employees invested in the company’s success and growth, money is a more immediate need during a crisis – more so when there is a lack of job security, forcing startups to take punitive measures to maintain a strong cash position.     In June, Zerodha had announced a buyback of up to Rs 65 crore to provide liquidity to employees who needed funds to weather the pandemic.

But Rohit says Paytm’s employee stock ownership plan is worth more than just cash to its employees. “Our ESOPs are valued much more than just hard cash and offering such wealth during this pandemic has helped us gain the confidence of our colleagues even more.”