Over the past few years you may have noticed that fewer companies offer stock options to new employees. In the 90’s, it was not unheard of for executives and even regular employees to get rich off of the generous stock options offered as part of a compensation package.

What is a stock option?
In general terms, as a part of a compensation package, employees are granted the option to buy a certain number of stocks at a set price (usually market price at the time of hire) based on a vesting schedule determined by each individual company.

For example, let’s say you were granted the option to purchase 6000 shares over the course of 5 years and you are vested in equal parts over those 5 years. This means that on your first year anniversary, you will be eligible to exercise 1200 of your options. Each successive year, you would be eligible to exercise 1200 more options until you reach 6000.

Today, with the stock market being bouncing up and down on a regular basis and with the inception of the Financial Accounting Standards Board’s FAS 123R rule change in 2004, the likelihood of companies granting stock options to regular employees has dramatically decreased.

Previously, FAS 123 suggested that companies recognize stock options as an expense when they were granted. The key word here is suggested. With the rule change, companies are now required to recognize stock options as an expense when they are issued. This means that companies are taking a larger hit up front for doling out options.

Who Gets Stock Options?
What does this mean for you? It means that while our economy is slowly strengthening, you will most likely see fewer instances of companies offering stock options as a part of their compensation package.

While it is not unheard of for companies to offer options to all salaried employees, most companies now reserve generous stock options for executive level employees only. But, that does not mean you should lose hope. With the paring back of stock options as a portion of compensation packages, companies are slowly increasing base salaries or increasing the potential bonuses that can be earned.

However, most bonus packages are based on performance so if the company you are working for does not do well, then your bonus goes out the window. Never fear, there are still companies out there who offer options as a portion of compensation.

What Should I do with Stock Options
Now, you might ask what you should do with the stock options once you get them. Depending on your financial situation, you may want to do a cash-out transaction, meaning you buy the stocks and sell them in a single transaction and you take the proceeds. The only caveat to this type of transaction is that the stock price must be over the option price for you to make any money and most times it needs to be several dollars over the option price. Remember, you will have to pay taxes on the proceeds.

The alternative option, if you are financially able, is to exercise your option and keep the stock, meaning you buy the stocks and keep them. Making this type of purchase is prudent only if the stock price is the same or more than your option price. You should look at the future prospects of the company before purchasing and keeping stocks. If the company is not doing well, I don’t recommend buying stocks in the hopes of selling it down the road.

Overall, while getting options as a part of your compensation seems exciting, it is rarer today than it was 10 years ago. With the fluctuations in the stock market, you may want to get the majority of your compensation through other avenues.

Scott Brown is the author of the Job Search Handbook (http://www.JobSearchHandbook.com). As editor of the HireSites.com weekly newsletter on job searching, Scott has written many articles on the subject. He wrote the Job Search Handbook to provide job seekers with a complete yet easy to use guide to finding a job effectively.