An ESOP is intended to provide benefits after an employee retires, while an ESPP offers immediate rewards. ESPP participants own the stock immediately. ESOP participants own stock purchased with their own contributions but employer-purchased shares vest over a scheduled period.
ESPP participants are not taxed on the discount they receive at the time of their stock purchases. If the shares are eventually sold at a higher price, capital gains taxes will apply to the profit earned on the sale. Shares in an ESOP are purchased with pre-tax money, so the employee pays less taxes while he is working. When the stock is withdrawn at retirement, the full amount of the distribution will be taxed.