RSU (Restricted Stock Units)
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A promise by an employer to grant shares of company stock to an employee once specific vesting conditions — typically time-based — are met.
## RSU (Restricted Stock Units)
RSUs are a popular equity compensation vehicle, especially at large public technology companies. Unlike stock options, RSUs have value as long as the stock price is above $0, making them lower-risk for employees.
### How RSUs Work
1. **Grant**: Employee receives an RSU award (e.g., 400 shares vesting over 4 years).
2. **Vesting**: Shares vest according to a schedule (commonly 25% per year or quarterly).
3. **Delivery**: On each vesting date, shares are deposited into the employee's brokerage account.
4. **Tax**: The fair market value of vested shares is taxed as ordinary income.
### Tax Treatment
- **US**: Vested RSUs are taxed as W-2 income at the share's FMV on the vesting date. Companies typically sell a portion of shares to cover withholding.
- **UK**: Taxed as employment income on vesting, plus NIC.
- **Germany**: Taxed as Arbeitslohn on vesting.
### RSUs vs. Stock Options
| Feature | RSUs | Options |
|---------|------|---------|
| Value at grant | Always > $0 | $0 if underwater |
| Cost to employee | None | Must pay strike price |
| Tax event | At vesting | At exercise |
| Risk | Lower | Higher |