Explained: Urban Company announces stock ownership plan worth Rs 150 crore. What it means for service professionals

What does it mean for service professionals?

New-age tech companies typically reserve stock options or Employee Stock Ownership Plans (Esops) for their permanent employees and are used as a tool to attract and retain talent. Employees are given a certain number of shares of these companies, usually at a minimal face value, which they can later sell at a later date depending on the company’s share buyback policy.

With Urban Company’s latest move, a part of its gig force would be able to become shareholders in the company which offers them a chance of some wealth creation. However, it is worth noting that the company has not yet announced how it will conduct a buyback of the shares that it allots to its service professionals.

How will Urban Company issue shares to workers?

The company said it will set up an evergreen trust to manage the program called the Partner Stock Ownership Plan (PSOP) and award stocks at a “near zero” cost to service professionals. The company’s co-founder Abhiraj Bhal said that stocks would be issued near to a face value of Re 1. Urban Company said it will set up a “fair and meritocratic process” to grant these stocks, taking into account both the performance of service partners and their longevity on the platform.

“The entire process will be rule based and transparent, with an advisory panel providing overall guidance,” the company said. Urban Company said it has got board approval for the first tranche of Rs 75 crore worth of stocks, to be disbursed over the next 3-4 years.

Do other startups have a similar plan and why is the timing of this move significant?

Before this, ed-tech company Unacademy had announced a similar plan worth $40 million for tutors on its platform. The announcement has come at a time when gig workers of several Indian startups have been complaining about poor pay and benefits. Workers of food delivery platforms Zomato and Swiggy have been vocal about the reduction in pay and lack of payment for additional fuel costs. Similarly, drivers on cab-aggregator platforms like Ola and Uber have also gone on strikes in the past to complain about reduced earnings.

According to a report by BCG, there are over 200 million gig workers. The report has said that while gig work remained broadly attractive to workers, specific pain points remained unaddressed. “These are typically related to work assurance, timely payments, learning and personality development and regular salary increments,” it added.

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