Tatas to announce ESOP plan for Air India employees

The announcement of an employee stock option (ESOP) scheme for employees of Air India could come by April 27.

This is as per a deadline set by the government in the Share Purchase Agreement (SPA) it signed with the Tata Group at the time of handing over the then national carrier.

As per the SPA, sources said, the new buyer was mandated to adopt an employee stock option scheme (ESOP) within three months of the closing date of the sale. The sale of Air India was closed on January 27, 2022, with the formal handing over of the airline to its new owner, Talace Pvt Ltd, a subsidiary of Tata Sons.

Tatas to announce ESOP plan for Air India employees

The SPA also stipulated that the terms and conditions of the ESOP Scheme be the same as the market standard for companies, giving all employees, without any limits of designation, the option to purchase ESOPs.

Also, the government specified in the SPA that up to 3% of the purchased shares acquired by the new owner will be up for grabs under the ESOP Scheme, and also importantly, at a price not higher than 1/3rd of the per-share purchase consideration.

In what could be seen as a pro-employee step, the government is also believed to have underlined at the time, that all employees of the airline would have the option to exercise their right to the ESOP Scheme, without any performance conditions or guarantees sought.

The sale of Air India was closed on January 27, 2022, with the formal handing over of the airline to its new owner, Talace Pvt Ltd, a subsidiary of Tata Sons.

As per Indian law, employees have a period of one year after the grant of the ESOP scheme to vest the option. Additionally, Tata Group is likely to give its Air India employees one month after vesting, to exercise the option.

With the announcement of the ESOP scheme for Air India employees, it will become the second company under the Tata Group, after Tata Motors, to have introduced the ESOP scheme for its employees.

Organizations often use Employee stock ownership plans as a tool for attracting and retaining high-quality employees. Organizations usually distribute the stocks in a phased manner.

Companies offering ESOPs have long-term objectives.

For instance, a company might grant its employees the stocks at the close of the financial year, thereby offering its employees an incentive for remaining with the organization for receiving that grant. Companies offering ESOPs have long-term objectives. Not only do companies wish to retain employees for the long term, but also intend to make them the stakeholders of their company.

The move is apparently directed toward retaining talent and improving the productivity of Air India, which has been a loss-making company for almost a decade. IndiGo and SpiceJet already have ESOP policies for their staff.

ALSO READ – EPFO enrols 7453 employees on board Air India for social security coverage

Air India announces group medical insurance scheme for its employees

On 25 October 2021, the central government, previous owners of Air India, signed a share purchase agreement with Tata Group, after its INR 18,000 crore winning bid to acquire the airline. On January 27 earlier this year, the formal handover took place.

ALSO READ – Air India announces group medical insurance scheme for its employees

Earlier on April 22, In an attempt to provide better medical facilities across a large network of hospitals across the country, Air India announced a Group Medical Insurance scheme that will be activated from 15 May 2022. 

The sum insured provided would be INR 7.5 lakh per annum per family (maximum family size 7 – Employees Spouse/Partner + 3 Children + 2 Parent/Parent-in-Law) with an option of corporate buffer, to be used by employees In case of medical exigencies.

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