How to Ask For RSUs at a Public Company — EquityFTW (2024)

FAQs

How to negotiate for RSUs? ›

Here are some examples of what you can say during your negotiation for RSUs. “I'm really excited to start working here at [Name of Company] and I want to feel even more invested in it right out of the gate. Would [Name of Company] be willing to give me RSUs as part of my offer?”

Some job seekers are willing to accept a lower base salary for the potential long-term gains of RSUs, while others prefer the security of a higher base salary. It's important to carefully assess the company's financial health, industry trends, and your own financial situation before making a decision.

If a company is already public, RSUs are usually taxable when they vest. If RSUs vest while you're at a private company, they usually won't be taxed until your company goes public or is acquired (this is called a double-trigger RSU).

For RSU's the deferred taxing point is usually when they vest. Your employer should be able to give you more information about when this happens. If you sell within 30 days this moves the deferred taxing point to the date of the sale which means you're not subject to CGT.

Up to this point, generally speaking, with teams of less than 12 people, the average granted equity for startup employees is 1%. This number can be as high as 2% for the first hires, and in some circ*mstances, the first hire(s) can be considered founders and their equity share could be even greater.

Types of Equity Compensation

Stock options give employees the right to purchase company stock at a set price, typically below market value, for a specified period of time. If the company's stock value increases, this can net the employee significantly more over time than a comparable amount of standard annual salary.

As an early-stage employee, the equity stake could range anywhere from under 1% for new hires to about 20% for the first employee or two, or even more for a founding team member (though the founder really needs to reel in their cap table if they're throwing 20% at people).

RSU taxes upon vesting

RSUs are considered supplemental income, and as such, the income you receive from them is subject to withholding taxes. The IRS requires a federal withholding rate of 22% for supplemental income up to $1 million, and 37% for income exceeding that amount.

What is a good RSU offer? ›

A good RSU offer is one that should incentivize you to put your best foot forward. One of the primary purposes of offering employees company equity is to encourage them to feel as though they have a stake in the company.

Because RSU income is considered supplemental, the withholding rate can vary between 22% and 37%. Usually, your employer will liquidate a percentage of the shares to cover the withholding requirement. In addition to federal income tax, RSU income may be subject to state and local income taxes.

Double trigger RSUs are a popular type of stock compensation leading up to an IPO. They are better for the employer – who doesn't need to recognize stock expenses until IPO. They are less mental energy for the employee – who doesn't have to pay taxes or make sell decisions until IPO.

Selling RSUs immediately upon vesting is a common approach for many individuals. The reason behind this strategy is to avoid any potential decline in the company's stock value. By selling right away, you can lock in the value of your shares and mitigate potential risks tied to stock market fluctuations.

Selling RSUs immediately upon vesting is a common approach for many individuals. The reason behind this strategy is to avoid any potential decline in the company's stock value. By selling right away, you can lock in the value of your shares and mitigate potential risks tied to stock market fluctuations.

The main vehicle for offering secondary liquidity in private companies, the tender offer, can provide liquidity to RSU holders in the event that the RSU vesting schedule is able to be accelerated or the RSU is scheduled to vest on the same day as the tender offer start date.

Key Points: A common rule of thumb is to sell restricted stock units when they vest because there is no tax benefit to holding the stock any longer. In a silo, selling RSUs as they vest often makes sense, but the decision can be complicated if you have other forms of equity, namely employee stock options.