Companies create and reserve a percentage of their stock for issue to their employees in future. A stock option pool consists of shares reserved for issue to employees based on a board-approved plan.
Since creating the pool has a dilutionary impact on all shareholders, new investors normally insist on the stock option pool being created prior to their investment, or on a pre-money basis.
Typically, the ESOP pool varies between 5% and 20% of the issued capital on a fully diluted basis. As companies grow and more employees are hired, this percentage could increase.