Udaan removes 1- yr cliff on ESOPs; can vest per quarter
NEW DELHI: Business-to-business (B2B) marketplace Udaan on Wednesday said it has decided to remove the one-year cliff on employee stock option plans (ESOPs) that mandated people to wait for a year before vesting their ESOPs, and allow all future ESOP allocations to vest every quarter.
“The one year ‘cliff’ period is a widely prevalent industry practice that requires employees to wait for one year for their ESOPs to start vesting. Udaan has done away with this waiting period,” said Udaan in a statement. Udaan added that every employee will be allotted ESOPs under their annual performance cycle regardless of their tenure or job profile. These ESOPs will vest quarterly and will be completely vested within a two-year period - twice as fast as the industry norm of four years, it noted. With these changes, Udaan ESOP holders in the company has jumped 400%.
Meenakshi Priyam, Group CHRO, Udaan, noted that the practice of granting ESOPs with a one-year cliff doesn’t reciprocate the trust that employees place on companies with their careers. “As a progressive employer, we have decided to take the lead in balancing the scales in employer-employee relationships in the industry and revamped our ESOP policy,” added Priyam.
To be sure, Indian startups have been exploring creative ways to hire and retain staff including expanding their ESOPs, as they battle each other and more established companies for talent. For instance, last year online meat seller Licious said all eligible employees could liquidate their ESOPs at any time after a one-year lock-in -- no questions asked. Edtech startup Teachmint introduced a similar ESOP liquidity plan last year.
Fintech startup BharatPe went a step ahead to offer $100 million worth of shares to its merchant partners, giving a key stakeholder the option to benefit from the company’s growth. Edtech startup Unacademy offered fully vested stock options to teachers on its platform.