How can you negotiate for a better employee stock purchase plan?

1 Know the basics

Before you start negotiating, it's important to understand how ESPPs work and what factors affect their value. You should be aware of the offering period, which is the time frame during which you can enroll in the plan and contribute a percentage of your salary to buy shares. The purchase period is a subinterval within the offering period when the shares are actually bought. The purchase price is usually based on a formula that applies a discount to the market price at the beginning or the end of the purchase period, or the lower of the two. Additionally, there is a holding period, which is the time you have to wait before you can sell the shares without triggering tax penalties. Lastly, lookback provision is a feature that allows you to buy the shares at the lowest price during the offering period, not just the purchase period, giving you more upside potential.

2 Compare the options

When evaluating an ESPP offer, it's important to compare it with other options and consider how it fits your financial goals and risk tolerance. You should ask yourself how much you can contribute, as most plans limit the amount to a percentage of your salary or a dollar amount per year. Additionally, you should look at the discount between the market price and the purchase price of the shares, as well as the offering period which determines how often you can buy shares and how long you have to lock in your money. Additionally, you should consider the lookback provision which can increase your returns by allowing you to buy shares at the lowest price during the offering period. Lastly, you should look at the holding period which affects your tax liability and exposure to market fluctuations. The shorter the holding period, the sooner you can sell the shares and pay lower taxes, and the less risk you take of losing value.

3 Research the market

Before you negotiate, you need to research the market and see what other companies are offering for similar roles and industries. You can use online tools, such as Glassdoor or PayScale, to find out the average salary and benefits for your position and location. You can also network with other professionals and recruiters to get insider information and insights. You want to have a realistic and competitive range of expectations and be able to justify your requests with data and evidence.

4 Prioritize your needs

When you negotiate, you need to prioritize your needs and be flexible with your options. You may not be able to get everything you want, but you can focus on the aspects that matter most to you and trade off others. For example, you may be willing to accept a lower salary or a longer holding period in exchange for a higher discount or a shorter offering period. You also need to consider the overall value of the compensation package, including other benefits, such as bonuses, health insurance, retirement plans, and so on.

5 Communicate your value

When you negotiate, you need to communicate your value and show how you can contribute to the company's success and growth. You want to demonstrate your skills, achievements, and potential, and how they align with the company's vision and goals. You also want to express your interest and enthusiasm for the company and the role, and how you can fit in the culture and the team. You want to build rapport and trust with the hiring manager or the HR representative, and show that you are a good match for the company.

6 Review the terms

Before you accept an ESPP offer, you need to review the terms and conditions carefully and make sure you understand them. You want to check the details, such as the enrollment dates, the contribution limits, the purchase price formula, the holding period rules, and the tax implications. You also want to ask about the vesting schedule, the plan administrator, the brokerage fees, and the withdrawal options. You want to avoid any surprises or misunderstandings that could affect your financial planning and decision making.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?