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Utilizing stock options as employee compensation

In previous decades, stock options in Florida were mostly given out to executives and others at the top of the corporate ladder. These were a way for high-level employees to be compensated by running the company well and helping the overall value to increase. These days, however, things have shifted so that some companies are using stock options as employee compensation, even for entry-level employees.

In fact, the National Center for Employee Ownership ran the numbers for 2010 and found that around 36 percent of employees had stock in the companies that they worked for, using various plans to obtain it. This was for publicly traded companies.

This tactic is used at all types of companies, but it is especially useful, in many cases, for start-up companies. These start-ups typically do not have that much cash on hand, so they can't offer high wages. However, they have a lot of work that needs to be done if the company is going to grow.

Offering stock options means they do not lose any cash immediately, but workers still feel like they are being compensated well beyond their hourly rate. If the company blows up and sees dramatic growth, this can be a way for employees to make way more than their base salaries, but there is no risk to the employers. Those employers may "lose" money down the line, but they're still gaining overall since the company would never have seen that growth without dedicated employees.

When signing a contract, be sure that you know exactly how you'll be compensated for your time, considering wages, stock options, benefits and more.

Source: CNN Money, "How to handle employee stock options," accessed June 04, 2015

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