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Restricted Stock Unit (RSU)

Candlefocus Editor

Restricted Stock Units (RSU) are a form of employee compensation in the form of company stock. Here, stock is granted to the employee but with certain restrictions. They cannot be sold until the vesting period has expired and they have been vested. The vesting period can last several years, during which time the employee gets no immediate benefit. After this period, the RSUs become available to the employee and the stock can be sold or kept like any other shares of company stock.

Unlike other forms of employee compensation, such as stock options or warrants, RSUs always have some value based on the underlying shares. This set value offers the employee a certain level of security and stability, as it means they are always guaranteed some value from the stock. For tax purposes, the IRS requires all the value of the vested RSUs to be reported as ordinary income in the year of vesting.

Overall, RSUs offer a great way for employers to reward key employees with equity in the company, while providing employees with the security of a set value. The grantee still has to wait until the vesting period is over to gain any benefit, but the RSUs will always hold their value, which provides the grantee with some form of financial gain.

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