How are ESOP shares allocated?

The company’s plan document provides the details on how shares are allocated to participants in the ESOP. For most ESOP-owned companies, shares of stock are allocated to participants based on compensation. Under these rules, each participant eligible for an allocation of shares gets a percentage of the shares being allocated based on their compensation as a percentage of total eligible compensation paid to participants. Some companies instead choose a formula that weights tenure or allocates shares on a per capita basis.