Employee Stock Ownership Plans(ESOP) are a type of employee benefit program that allows workers to purchase a stake or ownership in the company they work for, either through direct purchase or by receiving shares as a bonus or incentive. ESOPs were established under the Employee Retirement Income Security Act (ERISA),1974 to provide a tax-efficient way for employees to own a portion of their company.

ESOPs work by allowing companies to set up a trust that buys shares of the company's stock. Then The shares are allocated to employees based on a formula that takes into account factors such as length of service, salary, and job position. ESOPs can be either tax-qualified or non-qualified plans. Tax-qualified ESOPs offer several tax advantages to both the company and the employees, including the ability to delay taxes on company stock contributions until the shares are sold and a deduction for the company on contributions to the ESOP.

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