Udaan removes 1-year ESOP cliff, opts for quarterly vesting schedule

The one year cliff period is a prevalent industry practice that requires employees to wait for a year for their employee stock option plan or ESOPs to start vesting.

Udaan, the B2B eCommerce platform, on Wednesday announced an ESOP policy covering all employees and said future allocations will vest every quarter, as it removed the standard one-year cliff.

The one year 'cliff' period is a prevalent industry practice that requires employees to wait for a year for their employee stock option plan or ESOPs to start vesting. Udaan has done away with this waiting period.

The company also announced that every employee at Udaan, regardless of their tenure or job profile, would be allotted ESOPs under their Annual Performance cycle.

''In a 'first of its kind program', Udaan has decided to remove 'cliff' vesting for all ESOPs,'' the startup said in a statement.

The ESOPs will vest at a quarterly frequency and be completely vested within a two-year period -- twice as fast as the industry norm of four years.

Following these changes, the overall number of ESOP holders in the company has jumped 400 per cent and now covers 100 per cent of its employees.

The company currently has over 4,500 employees on its rolls.

Meenakshi Priyam, Group CHRO (chief human resources officer) at Udaan, said, ''People trust companies with their careers. We felt that the practice of granting ESOPs with a one-year cliff doesn't reciprocate this trust''.

Udaan has decided to take the lead in balancing the scales in employer-employee relationships in the industry and revamped its ESOP policy, Priyam added.

Earlier this year, Udaan raised a total of USD 250 million through convertible notes and debt funding to capitalise on the enormous growth opportunity that the Indian e-commerce market offers.

The company has invested more than Rs 4,000 crore in the past 12-18 months across different pillars of business, including people, technology, supply chain, category, credit, and compliance, in order to accelerate and strengthen capabilities to serve customers better, the statement said.

Over the last five years, Udaan has built the e-commerce ecosystem with a network of over three million registered users and about 30,000 sellers across 1000 plus cities in the country. 

The platform has over three million kirana shops, retailers, chemists, farmers, and others, doing over 5 million transactions per month.