An employee stock purchase plan, or ESPP, is a program that allows employees to use after-tax payroll deductions to buy their employer's stock, usually at a discount. Typically, employees make contributions to a purchase fund via payroll deductions over a period of timeâusually six months. Then, at designated points during the year, the employer uses the accumulated funds to purchase stock on the employee's behalf.The IRS limits employee contributions to an ESPP to $25,000 per calendar year. Employers can further restrict contributions to either a percentage of the employee's salary or a flat dollar amount. For example, the employer might cap contributions to an ESPP to 10% of the employee's gross salary.