RSU (Restricted Stock Unit)

Restricted Stock Units (RSUs) are a form of equity compensation where the employer promises to grant you a number of company shares that become yours over a vesting schedule. **How RSUs work:** 1. At grant: You're told you'll receive X shares over 4 years 2. At vest: On each vest date (usually quarterly or annually), a portion of shares become yours 3. Taxation: The shares are taxed as ordinary income at the fair market value on the vest date 4. Flexibility: Once vested, you can hold, sell, or gift the shares **The tax consideration:** RSU income is taxable ordinary income — not capital gains. Your brokerage will withhold shares or sell a portion to cover the tax liability. This is automatic at most companies. Make sure you understand what your after-tax RSU income will actually be. **Double-trigger RSUs (private companies):** At private companies, RSUs often have two vesting triggers: (1) time vest and (2) a liquidity event (IPO or acquisition). You don't receive the shares until both conditions are met. If the company never exits, the RSUs never deliver value regardless of how long you've been vesting. **RSU value fluctuation:** Unlike stock options, RSUs have value even if the stock price drops (they can't go 'underwater'). But they're also worth less if the stock price falls from when you joined. Early large grants can become worth much more or much less than expected over a 4-year vest. **Annual refresher grants:** Most large tech companies give annual RSU refresh grants to retain employees whose original grant is mostly vested. These are negotiable and worth asking about.