That's assuming the stock goes up.

My friend joined Square in February 2021 right when they were at the peak. His RSUs he got are now worth almost half.

Edit Time in the market is usually used for index or broad funds, not for individual stocks due to diversification giving better chance of appreciation.

It still applies to individual stocks. Diversification comes from working at different companies over your career.

Using Amazon as an example. If you were given a 10k grant (bear with me here) in 2018 and held on to that until now (when it all vested in 4 years)....

2018 price. 1170$, say 10 shares so 11700$

Right now its worth once you get it lets say 3260$ a share.

So you got over 300 percent return. If you are saying "just give me the 11k in cash and let me buy my own stocks. Well they could, you'd get probably taxed more for that though. (depending on how you handled it, where you lived, et cetra)

That tax difference when you are talking 100ks of stock is entire lower class people salaries for a year.

You can also play some interesting financial games with that much stock. You can put up 100k as collateral for a loan that will have very compelling interesting rates if its a stock that is seen positively and low risk like Amazon stock. And the tax that money is handled tax wise is also interesting.

But you are also concentrating your risk.

If you receive stock from your employer and it does not do well, that will probably harm your salary/job as well and you'll lose twice.

If instead you receive the cash value of the stock and invest elsewhere and your employer's stock tanks, taking your salary/job with it, your investiment elsewhere won't be affected.

Yep, RSUs are a gamble. I would say the vast majority of time its to the employee's benefit to get straight cash instead.

I wouldn't want to be getting RSU's at IBM for instance :)

Using one of the companies that did well over time as an example isn't really fair. There's lots of companies where those stock options would be worth a moderate amount, and even more where they would be worth nothing.

I think it'd be rare for RSU's in a public company to be worth nothing. These aren't options, but actual shares. The only way they'd be worth nothing is in the event of bankruptcy.

I agree. You "probably" want to get paid in straight fiat money 9 times out of 10. But if you are looking to move out to a different position and have already established your financial means, RSUs have some things about them that become attractive.

But you should be looking at RSUs as a funny money kind of thing.

I really don't get this. If you give me the money I can just buy the stock if I want to and then it is identical. But the option to do something else with that money has value. So it is always more valuable (to me) to just receive the money.

I think RSUs are more valuable to companies, which is why they do things this way. And that's fine. But it doesn't mean they are more valuable to me.

If you have other capital gains, then its less of a gamble because then you can use the loss if it goes sideways to offset your other gains. But for the vast vast majority who get RSU's yes its not preferred.

RSUs are taxed as income at the time they vest. If you were given the exact same amount as a cash and then used that cash to buy that exact same amount of stock, then the tax treatment would be identical.

Of course nobody would actually do that with the cash, because most other things (like buying an index fund or stock in one or more competitor companies) would be a smarter thing to do with it.

> stock in one or more competitor companies

Be careful with this... if we're talking about diversifying your risk, there's a good chance that the stock values of your employer and of its competition in the same industry are positively correlated modulo some market events. Better to buy stock that is likely to be independent of the industry that derives your primary salary.

Sure. I'm just speaking hypothetically. It might have been better to say "uncorrelated" rather than "competitors".

You wouldn't get taxed more. You have to pay the taxes either way.

You can play all those games with stock just by using cash given to you to buy stock.

You'd have the same tax burden if you were given cash vs. vested shares worth the same amount.

This isn't true because you need to pay income tax on both RSUs and salary, but if you were given more salary to invest yourself, then you'd also be subject to capital gains tax. There are no capital gains on RSUs prior to vesting.

Don't you pay income tax on the appreciation then? That's much worse than capital gains...

Or you could just buy Amazon stock when given the money instead.

Except no company is going to give you the equivalent of 4 years of salary upfront. That’s the part you’re missing; companies that give 4-year RSU grants are effectively giving you an (illiquid) advance on your pay that grows until you vest and cash out.

That _can_ grow. Everyone here is riding the tech stock wave, where anywhere else in the world you are essentially betting your future salary on the stock market. Whats the tried and true advice? Don't trade your own stock.

But if you were just paid more salary, you would perhaps invest that excess in the market, and you would have equal time in the market. Also, you need to pay taxes on the market value of RSUs at vesting time so it isn't like you can get away with some kind of pre-tax investment scheme.

This isn't right because you're granted the stock when you start, and can sell when you vest vs with your salary you can only invest it after you receive it. Here's an example. Let's say you get hired today with a package that amounts to $200k salary + $100k/yr RSUs over 4 years at a public company. Let's also say the stock is increasing at a rate of 10%/year.

Year 1: $200k salary + $110K stock = $310k TC

Year 2: $200k salary + $121K stock = $321k TC

Year 3: $200k salary + $133K stock = $333k TC

Year 4: $200k salary + $146K stock = $346k TC

Without any kind of raise or refresher grant you're making 15% more total in year 4 than when you started. When the stock vests, you pay tax as if it were ordinary income, and you can sell immediately for cash.

That example was for a stock growing at 10%. Now consider if that company was Alphabet.

Stock price for GOOG on Jan 1, 2019: 1116

Stock price for GOOG on Jan 1, 2020: 1434 (+28%)

Stock price for GOOG on Jan 1, 2021: 1835 (+27%)

Stock price for GOOG on Jan 1, 2022: 2753 (+50%)

Sure. Now consider the opposite where the stock flatlines for 4 years whereas the market otherwise goes up. Not as good of a deal any more.

Then its exactly the same as if your salary were 110K higher each year, so its no longer a better deal, but its not a bad one unless the stock (significantly) underperforms whatever your normal investment mix would be.

It's less about getting away with not paying taxes and more about the fact that RSUs are basically a big negative-interest loan to invest in the company's stock, which can be incredibly lucrative in the growth sector.

It is only negative interest if the stock goes up. It is positive interest if the stock goes down. So you could call it a variable rate loan to invest in the company's stock. I would not choose to take out such a loan against the growth rate of the company I also rely on to pay my salary.

I would actually like RSUs more if they granted me shares in a basket of stocks of competitor companies. At least then it would hedge my already high exposure to the fortunes of the company I work for.

If the stock goes down, you can walk away from the arrangement without being on the hook for anything. If it goes up, you collect a salary while having exposure to the company stock without having to put up any of your own capital.

I am not seeing where the positive interest is here.

Relative to just being given the cash instead of the equity.

But with RSUs, you lock the purchase price in at the time of hire. So if you are granted a four-year grant in 2022, you get RSUs of stock in 2026, but at the 2022 price. So if you're granted $1k/month of RSUs, and the company stock doubles in that four years, each month you get $2k worth of stock.

Your employer won't do that with salary.

As you say your getting a much better tax advantage and can use capital Gains to reduce the tax rate.

Though compared to the US the UK has much better treatment of "employee" share schemes. The most common Sharesave is effectively a risk free investment at a 20% discount.

I am surprised if the Google union hasn't got fairer treatment of stock options on its agenda and I do mean for all employees.

> As you say your getting a much better tax advantage and can use capital Gains to reduce the tax rate.

This isn't true. RSUs are taxed as income at vest time, so if you're granted 100K in RSUs in 2020, and they vest in 2023, come 2023, if the stock has increased 25% to 125K, you'll be taxed on 125K of income. No capital gains involved anywhere.

Ah sorry was looking with a UK perspective - the USA really doesn't want the little people accumulating capital does it.

https://frazerjames.co.uk/rsus-a-tech-employees-guide/ seems to suggest that it works the same way in the UK. Are you perhaps confusing RSUs with options?

HMRC Approved schemes only from Share Save through EMI (the gold standard)

If you get RSU's in an American parent company your screwed its just income there's some calculations on the relevant redit r/UKPersonalFinance - basically its treated income and you also don't get the legal protections

It's actually even worse in the UK. If you get a grant in the UK, you still owe taxes when it vests, even if you've left the UK years ago.

as the site says "The UK tax treatment for RSUs is similar to how your salary is taxed."

The example shown on the site you quote has a 56.53% effective rate - don't forget you pay NI as well

As I said very poor I paid zero tax on my two share saves and my current EMI is at the 10% rate.

Update the 56.5% rate is after you put 20k into pension the actual rate is just under 70%

While many of the replies in this thread adequately explain why I dislike stock grants (taxes, needing to setup autosell or manually sell in a trading window, etc.) the one thing that I think is also important is that I really am not trying to get rich. If I’m at an established company, the gains or losses will probably be modest with some exception, and if I’m at a startup, it is undoubtedly very risky. But while I would never work towards making less money for the sake of making less, I would like to optimize for quality of life, simplicity, saving time, etc. and I feel base salary is often reasonable enough to handle most of my needs. If I wanted to invest, I’d rather do it myself. I don’t usually invest much, though.

I do tolerate RSUs, but it’s not the allocation I’d make given the choice.

One benefit about cash is that I have it upfront and I'm not taking a risk with part of my "salary". Stocks are something akin to an IOU that may or may not be paid in the future.

If I wanted time in market with that particular stock, I could use the cash you give me to buy that stock and leave it in the market. I don't need to be forced to do so.

That's not quite equivalent, unless the company gives you all of the cash upfront.

companies have terrible vesting periods like 5% the year 1, 15% in year 2 and so on, while working you to death, effectively hoping you'd quit before your entitled shares vest. This also assumes stonks only go up.

This is a very abnormal vesting schedule. I've never interviewed with a company that has a schedule like that. The most common schedule is 25% per year, over 4 years, vested per month, except that the first 25% comes as a lump as the end of the first year. Most companies provide refreshers every year during the comp cycle. Normally during times when stock prices are low for a company, they'll take that into consideration during the comp cycle and give larger bumps.

They're all different. Amazon pays you cash up front with backloaded vesting. Google is experimenting with frontloaded vesting where you get the bulk in the first couple years.

That's amazon. The company I'm at is 25% after year 1, then 12.5% every 6 months. Once you get a few years in it's pretty much just a rolling part of your salary.

> This gives you a ton of “time in the market” and they generally appreciate quite significantly if you’ve picked a good company.

I think you can rephrase that to in this stock market boom tech market stocks are appreciated to crazy high levels. It wont happen again in the next decade.