How Do Employee Stock Purchase Plans Work (ESPPs)

An ESPP, or Employee Stock Purchase Plan, allows employees of a company to purchase stock in the company - usually at a discount.

At first glance, you might think your employee stock purchase plan is just a matter of contributing money to it each month. But once you start peeling back the layers, there’s far more to it.

There are three main areas to be aware of in ESPPs: Company match, purchase period, and look back.

“Once you have those three key pieces of information, it becomes very evident whether it makes sense to participate,” Emily Cervino, a vice president in Fidelity’s stock plan services group, told Forbes.

This guide will help you to get the most out of your ESPP and navigate the various language common to these plans.