Rank-and-file workers will increasingly clamor for stock options, and most employers will fork them over. That's because providing stock options can be a win-win proposition: Workers get higher compensation, and employers get a tax break. In today's economoy, more employers are using stock options as a key retention tool. Options allow workers to buy a given amount of company stock at a specified price; they can then sell the stock at some point in the future. Workers can make a tidy sum if the shares' prices have risen when it's time to exercise the options-a good reason for many employees not to jump ship.

What is a Stock Option Purchase Plan? A trust established by corporation which acts as a tax-qualified, defined contribution plan by making the corporation's employees partial owners. Contributions are made by the sponsoring employer, and can grow tax-deferred, just as with an IRA or 401(k) plan. But unlike other retirement plans, the contributions must be invested in the company's stock. The benefits for the company include increased cash flow, tax savings, and increased productivity from highly motivated workers. The main benefit for the employees is the ability to share in the company's success. Due to the tax benefits, the administration of stock purchase plans is regulated, and numerous restrictions apply.

Offering stock options is also a way for an employer to fatten a worker's overall compensation package without raising the worker's base salary. Employers' growing reliance on stock options, bonuses and other "variable pay" helps explain why base wages have increased only moderately despite the tight labor market.