3 ms·

Given a certain dollar amount (e.g. X% of salary), the number of RSUs to grant is calculated by dividing the dollar amount by the market price of the stock. The

by a4isms 4y ago

Given a certain dollar amount (e.g. X% of salary), the number of RSUs to grant is calculated by dividing the dollar amount by the market price of the stock. There are two common ways to calculate the market price of the stock, and the difference comes down to this: 1. The market price of the stock is determined at the time of the grant, and; 2. The market price of the stock is determined at the time the RSUs vest. If there’s a one-time grant that is given immediately, the two values are usually going to be very close. But if the grant vests over some number of years (e.g. four year schedule, 25% vests after one year, remaining 75% vests monthly), the difference between the two methods can differ greatly. When the price is determined at grant time, employees benefit from the stock rising, and are penalized if the stock falls. When the price is determined at vesting time, employees end up with the same compensation no matter what the stock does, they only benefit from appreciation if they hold the stock and it appreciates after vesting. In your company, do the bonus RSUs have a vesting schedule? Or are they granted and distributed shortly thereafter?

s1artibartfast 4y ago
In my company there are multiple important days: 1) Find out RSU bonus value: "you get 20% of your salary worth of RSUs" 2) Grant Date: Company Calculates the number of RSUs, issues them, and starts Vesting schedule. 3) Vesting days: Some of the RSUs become vested and can be sold by the employee. >The market price of the stock is determined at the time the RSUs vest. What is the point of giving stock priced on the vesting day? It has no chance to go up or down between the grant and vesting date when it is sellable. It would be the same as a cash bonus with an X year delay.
- a4isms 4y ago
  > What is the point of giving stock priced on the vesting day? It has no chance to go up or down between the grant and vesting date when it is sellable. It would be the same as a cash bonus with an X year delay. An excellent question, somewhat epitomized by the late Mitch Hedberg’s joke: “I think a gift certificate is a bad gift. You take money that is good everywhere…” Same here, it’s no better than cash, only it’s a PITA to convert it to cash if you want cash. That being said, there are a few scenarios I have seen that fit the pattern: 1. Some companies have an ESPP program where some cash is deducted from each pay and placed in escrow. At regular intervals, the accumulated money is turned into shares at market value, and the employee receives the shares. There is usually a modest discount involved, e.g. 15%. If the employee sells the day the shares vest, they harvest 15% of the value less taxes. Or the employee can HODL, as they see fit. Even without a discount, some employees may prefer an ESPP to making their own investments in the company stock. There is the convenience of having the money deducted at source, many people find that an easier way to save than relying on discipline. 2. The company is cash-poor and pays some comp in stock because they have shares in their treasury. One can understand why some companies would want to do this, without agreeing that employees would prefer this to cash.
  - deadmanwalking 4y ago
    I think RSUs are better than cash. In the UK I have a choice, take my bonus as cash and pay a hefty amount for of tax, or take the same pre tax amount as RSUs hold it for a minimum 5 years so that it’s tax free.
    - crazygringo 4y ago
      I don't think that's correct -- everything I can find online says that in the UK you pay income tax on RSU's no matter how long you hold them. The only technicality is whether they're "subject to forfeiture" in which case you pay the tax after 5 years, or not, in which case you pay the tax upon vesting. But no matter what you're always paying income tax. You may not be as aware of it though, since the company that grants you the RSU's will generally sell a portion of them in order to cover your taxes before you even receive them. (That is standard in the US too -- e.g. 50 units vest but only ~32 show up in your brokerage account.)

by a4isms 4y ago

s1artibartfast 4y ago

In my company there are multiple important days: 1) Find out RSU bonus value: "you get 20% of your salary worth of RSUs" 2) Grant Date: Company Calculates the number of RSUs, issues them, and starts Vesting schedule. 3) Vesting days: Some of the RSUs become vested and can be sold by the employee. >The market price of the stock is determined at the time the RSUs vest. What is the point of giving stock priced on the vesting day? It has no chance to go up or down between the grant and vesting date when it is sellable. It would be the same as a cash bonus with an X year delay.

a4isms 4y ago
> What is the point of giving stock priced on the vesting day? It has no chance to go up or down between the grant and vesting date when it is sellable. It would be the same as a cash bonus with an X year delay. An excellent question, somewhat epitomized by the late Mitch Hedberg’s joke: “I think a gift certificate is a bad gift. You take money that is good everywhere…” Same here, it’s no better than cash, only it’s a PITA to convert it to cash if you want cash. That being said, there are a few scenarios I have seen that fit the pattern: 1. Some companies have an ESPP program where some cash is deducted from each pay and placed in escrow. At regular intervals, the accumulated money is turned into shares at market value, and the employee receives the shares. There is usually a modest discount involved, e.g. 15%. If the employee sells the day the shares vest, they harvest 15% of the value less taxes. Or the employee can HODL, as they see fit. Even without a discount, some employees may prefer an ESPP to making their own investments in the company stock. There is the convenience of having the money deducted at source, many people find that an easier way to save than relying on discipline. 2. The company is cash-poor and pays some comp in stock because they have shares in their treasury. One can understand why some companies would want to do this, without agreeing that employees would prefer this to cash.
- deadmanwalking 4y ago
  I think RSUs are better than cash. In the UK I have a choice, take my bonus as cash and pay a hefty amount for of tax, or take the same pre tax amount as RSUs hold it for a minimum 5 years so that it’s tax free.
  - crazygringo 4y ago
    I don't think that's correct -- everything I can find online says that in the UK you pay income tax on RSU's no matter how long you hold them. The only technicality is whether they're "subject to forfeiture" in which case you pay the tax after 5 years, or not, in which case you pay the tax upon vesting. But no matter what you're always paying income tax. You may not be as aware of it though, since the company that grants you the RSU's will generally sell a portion of them in order to cover your taxes before you even receive them. (That is standard in the US too -- e.g. 50 units vest but only ~32 show up in your brokerage account.)