Introducing the Employee Stock Ownership Plan (ESOP)

Q1 2025 marks a critical milestone in Workpay’s growth, with the rollout of the Employee Stock Ownership Plan (ESOP). Announced at the Q1 Town Hall, the initiative was put in motion by Workpay’s founders immediately following the June 2024 Series A fundraise.

CEO Paul Kimani notes that the ESOP is “in keeping with Workpay’s performance culture, as well as our core values of People First, Accountability, and Stay Hungry. Those who serve and perform over the long term should benefit from the company’s growth and success, whenever possible.”

Roughly half of Workpay employees were immediately eligible to participate in the ESOP, and have received offers to be granted share options.

What is an ESOP?

An ESOP is an employee benefit plan that provides employees an ownership interest in the company they work for. A certain amount of shares in the company are allocated to the ESOP so that they can be vested to employees in the form of options.

If the company grows and increases its value, the value of the share options also grows, giving the employees the potential to cash out if there is an opportunity to exercise the options and sell the shares. Workpay’s ESOP contains 10% of the company’s current shares, meaning that, over time, employees can earn options that total this proportion of the company’s overall value.

‍Who can participate in the ESOP?

Participation in Workpay’s ESOP is offered to all employees at the level of “Senior Executive” or higher. However, participation for those eligible now and in the future is always voluntary. As part of joining the company, each eligible employee is offered a number of share options in line with their Level, Grade, and Department, according to an ESOP framework that has been approved by Workpay’s Board of Directors. This framework resembles the company’s salary framework.

How is Workpay’s ESOP managed?

Workpay’s Pulley account is administered by the VP Operations at the discretion of the CEO and CFO/COO, and subject to board oversight. Administration of the ESOP is done in a software called Pulley. Employees eligible to participate are issued grant offers from the platform. Those who choose to digitally sign their grant offer are provisioned a Pulley accounts, where they can retain visibility on their options.

How does the ESOP work?

The ESOP contains shares of WorkPay Technologies, Inc., the company’s USA holding company that owns Workpay Kenya, Nigeria, and all other subsidiaries. This means it holds the value of all Workpay operations, products and services.

Eligible employees that sign their grant offer technically do not yet own shares in the company (like the founders and investors). Rather, they are granted an option to purchase common shares in the future, but at the value or price assigned at the time of the grant. This value is called the “strike price” or “exercise price”.

So, if Workpay’s value increases over time, after an employee is granted options, and then at some point an organization wants to buy Workpay, the employee may have the opportunity to “exercise” the option– buying them at the strike price and selling them to the buyer at the new value. The employee will earn the difference, thereby earning a lump sum of money in reward for their contributions to the company’s growth in value to that point.

The greatest reward will tend to go to those who have served longest, as employees can only exercise and profit from their options once they have “vested”. Options begin vesting one year from an employee’s start date, with 25% vesting immediately at that point and another 2% (1/48th) vesting monthly thereafter. This means that only after 4 years are all of the employees options fully vested and eligible to be sold.

Why an ESOP?

Workpay’s ESOP model is common in Silicon Valley, and increasingly common for African startups as well. It was designed in consultation with several US and international operational and legal advisors. The idea, he says, is to reward employees who:

1. serve loyally and effectively over the long-term
2. contribute up to and beyond to the level of Senior Executive or higher during their service, and
3. stick with the company through to achieving its highest growth ambitions

The benefit of working for a startup like Workpay is the energy, excitement and creativity that comes with building and growing something completely new and innovative, and the personal growth that comes with that. But there is a tradeoff. Startups are high-risk and cash constrained. In the pursuit of profitability, they often cannot offer salaries at the top of the market. An ESOP provides an incentive and hopefully a reward to those who share in the risk, the excitement, and the growth, rather than taking the easy path.

Paul and Jack are quick to emphasize that ESOPs, like startups, come with no guarantees. And yet, the entire executive team, along with the Board of Directors who approved the ESOP, are confident and excited by Workpay’s prospects for a future exit that will be to the financial benefit of a great many of the employees that help the company get there.