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How does employee equity work?

Employee equity, often confused with employment equity, is a different concept altogether. It refers to the practice of offering employees a stake in the company they work for, typically in the form of shares or stock options. Employee Equity is often found in BBBEE employee schemes.

This approach is designed to align the interests of the employees with those of the company, incentivising them to contribute to the company's success.

Let's take a look at a hypothetical company, 'ACME'. As a start-up, ACME offers its employees, equity as part of their compensation package. This means that each employee is given a certain number of shares or stock options in the company. 

As ACME grows and becomes more successful, the value of these shares increases. This gives employees a direct financial stake in the company's success, motivating them to work harder and contribute more to its growth. It's a win-win situation: the company benefits from its employees' increased commitment and productivity, and the employees benefit from the financial rewards of the company's success.

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