
Ask HN: Are RSUs worth your loyalty? - mutaaf
I have been in the industry for quite sometime and received many different benefits from all types of employers. RSUs have been one way I determine my job security or lack thereof. What benefits or lack thereof do RSUs have for Engineers or Engineering Leaders?
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mabbo
You should think of RSUs no differently than you think of your paychecks.

There is a scheduled date (every 2 weeks for my paycheck, every 6 months for
my RSUs) where I will be given some <money> dollars if I am still working
here. I will pay income tax on that income. One is in the form of money and
the other is in the form of stocks, but really you should sell those stocks
and buy something more stable and not tied to your employer.

If you quit or get fired, you won't get your paychecks on the days you
expected to in the future. Nor will you get your RSU vests. Same thing. Just
bigger numbers and lower frequency for one of them, with some additional
variability in amounts.

They aren't golden handcuffs. They aren't job security or threats. They're
just pay to keep you working, like anything else.

edit: I lost a word or two.

~~~
ryaan_anthony
Or if the company is sold before you vest, the new management can decide not
to honor your RSUs. It happened to me!

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mabbo
You're company decided to give you a pay cut. They wrapped that present around
reasons like a buy out, but that's what they did. Who cares if it's your new
management or old management, it's your employer and that was what they chose
to do.

It's no different than if they said hey, we're going to pay you less money
every paycheck, because <reasons>.

All you can do is ask if your remaining pay is worth the work you do.

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lnanek2
Aren't RSUs the opposite of job security? If you get fired or leave before
they vest, you lose them. In the bay area they are often called golden
handcuffs because developers halfway through their 4 year term often have
another million in RSUs vesting, so can't go leave and work on their friend's
awesome startups and the like, since the startups can't afford to match the
compensation.

~~~
qeternity
If you get fired, unless it qualifies under some due cause, the options should
immediately vest.

~~~
lnanek2
> If you get fired, unless it qualifies under some due cause, the options
> should immediately vest.

That definitely didn't happen at my company. We had a round of layoffs and the
package offered to people who signed an agreement not to sue only included a
couple weeks of accelerated vesting. There was no performance management
system in place either, so the people fired were basically just the bottom of
the stack rank their managers were asked to turn in, which was often based
more on personal like or dislike than performance.

There was one engineer entering his fourth year, who had saved the company 30
million dollars during his term with infrastructure efficiency improvements,
who was laid off and lost millions in the RSUs that would have vested that
last year (he was on a 10/20/30/40% schedule). All the ICs speculated he was
fired so the company wouldn't have to pay.

~~~
toast0
> There was no performance management system in place either, so the people
> fired were basically just the bottom of the stack rank their managers were
> asked to turn in, which was often based more on personal like or dislike
> than performance.

And that differs from the result of a performance management system how? Maybe
that rank and file didn't have to spend as much time writing reviews?

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matmann2001
RSUs are a decent way of aligning company success with employee success. But
there's plenty of pitfalls with RSUs too.

1) From an investment risk perspective, your personal livelihood is already
significantly tied to the company because you rely on the company for a
salary. Holding a significant chunk (relative to your total investments) of
stock in your company as well adds to that risk.

2) Unless you're a C-suite exec, your actions will likely have no direct
impact on the stock price. And obviously, insider trading is illegal. That
means holding your own company's stock has no fundamental advantage over
holding stock of a company you don't work for. If that's the case, you're
better off picking stocks based on actual performance and eliminate the
personal bias.

3) You can sell your RSUs once they vest in order to diversify, but you have
to wait a year after vesting or short term gains tax will apply to any gains
post-vesting. So, it might be advantageous to wait a year if you don't plan to
sell immediately upon vesting. Also, with some companies, a portion of your
shares will be surrendered back to the company to cover income tax on the
shares.

4) From a tax filing perspective, RSUs and ESPPs can be a PITA. In my
experience, tax software and general tax filing services often don't know how
to correctly record the cost basis, which means you end up getting taxed twice
if you don't know what you're doing.

5) When cash is tight, companies might lean more heavily on RSU-based
compensation if they can't afford raises or cash bonuses. You need to make
sure your company is giving you what you need.

6) The golden handcuff effect. You want to leave for a better job, but you've
got a nice chunk of RSUs that haven't vested yet and could be worth quite a
bit in just a couple more years. Is that new job worth the opportunity cost of
giving up those shares? For companies that award RSUs as part of yearly
performance reviews, you're pretty much always going to have some RSUs that
are 3 years out from vesting. It's just difficult weighing the potential value
of RSUs vs a new job's salary/benefits and whatever reasons you wanted to jump
ship in the first place. It's very personal math and ultimately you have to
determine an answer for yourself.

~~~
alex_young
> 3) You can sell your RSUs once they vest in order to diversify, but you have
> to wait a year after vesting or short term gains tax will apply.

This is incorrect. RSUs, once vested, are taxed as income, and any gains or
losses from the day they vest are treated as any other stock would be from
that day on. There is no tax benefit in holding on to them rather than selling
and diversifying.

This detail makes RSUs equivalent to income from an employee's perspective,
and offers no incentive alignment post vesting IMHO.

~~~
matmann2001
I meant that short term gains tax applies post-vesting. I'll try to make that
clearer. Of course, you're right in that selling immediately incurs no
additional tax, as you'd be paying short term gains tax on essentially $0.

~~~
klipt
Right, but if you sell immediately on vesting those gains will be ~0, so
there's no major tax downside to selling immediately and e.g. buying an index
fund instead to diversify.

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bduerst
RSUs are golden handcuffs.

You'll continually get a raise each year and a portion of that will be new
RSUs that vest over the next four years. If you ever want to leave, that
continually means leaving a substantial amount of money on the table.
Thankfully some companies will give you a hiring bonus equal to your unvested
RSUs though (edit: the big tech companies poaching from each other will
sometimes do it, for those asking).

As with all things labor related, RSUs are transactional. "Loyalty" shouldn't
play into it because a large publicly traded corporation can only be so loyal
to every one of it's employees.

~~~
throw2773sgge
> Thankfully some companies will give you a hiring bonus equal to your
> unvested RSUs though

Do you have any company names? Also, any numbers from your experience? I’d be
quite happy to join pretty much anything for a 600K+ signing bonus.

~~~
nik_0_0
I’ve heard of companies matching the RSU 1:1, same value, same schedule. Not a
sign on bonus though.

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apexkid
I disagree with anyone saying that RSU's are ideal way to get employees
invested in a company's success. In practice, total compensation for an
employee is decided by market value of that employee. If RSUs shoot up, you
will get lesser base pay, if they go down you will end up getting higher base
pay in next appraisal cycle. Your salary might be inflated or underflated (for
lack of a better word) for a while but in long term the company will balance
it out with market standards.

If you think of RSUs as an investment, then its a different game. However, it
is no different than owning stock on NASDAQ. You can get rich if you buy the
right stock.

Hence, my perspective. All cash better than RSU. If you wanna buy stocks then
just buy from stock exchange of whichever company you want.

Caveat: For startups where you get equity this argument doesn't hold true.
There the startup might end up a unicorn and you make ton of money.

~~~
SubuSS
The problem being I can't think of a single company that offers an all cash
deal even close to the FAANG offers (or pre-ipo offers in one of the
unicorns).

Even a bunch of giant companies like HBO/Samsung etc. got priced out for the
same reason at least in a few cases I know.

~~~
myvoiceismypass
Netflix offers all cash comp (plus options, not the same)

~~~
tmarman
Came to say this.

Of course, having NFLX RSUs over the last 10 yrs would be worth more than the
salary increase, just saying.

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didibus
RSU's aren't as good a deal as the equivalent worth in salary, but are a
better deal than a lower salary, unless the company stock tanks.

They allow the business to transfer some of the risk from them to you.
Basically a kind of I'll pay you more if I can.

Think of it as, I'll pay you X dollars now, and in 4 years, I'll pay you an
additional Y dollars * how much I can afford, unless you no longer work here.
Where "how much I can afford" is basically the stock price.

It's better than the same salary without RSU. It's worse than a higher salary
of equal worth. For anything in between, it depends on your risk tolerance and
when you'll need the money.

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ThrustVectoring
RSUs are worth very slightly more than straight cash compensation due to the
optionality. Your compensation will go up and down as the underlying stock
moves, and you are allowed to switch jobs when the stock price moves
downwards.

~~~
ozten
RSUs are worth more due to tax implications?

I'd rather have a dollar now versus the equivalence of a dollar in a stock
which is unavailable for up to 4 years...

Even if your companies stock is out performing the market, I'd rather have a
dollar now to buy company stock and keep my mobility.

Employees need to be careful to diversify their portfolio. A dollar today can
be put in any type of investment, whereas RSUs can lead to folks having too
much of their egg nest in one basket.

~~~
goobynight
RSUs are as good or better than cash as long as you can keep a job for the
length of the cliff. That's typically just a year...

The 4th year of an RSU grant is just as unavailable as my base salary 4 years
away.

~~~
ozten
Good point, I wasn't thinking clearly about base salary 4 years away.

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jiveturkey
An odd question. RSUs are part of TC, that's it. It is completely unrelated to
job security. What has led you to think that there is a relationship?

~~~
mutaaf
There are a finite # of RSUs which management can distribute to high
performers or valuable team members vested over a period of employment time.
Here’s why I feel like job security is oddly related, why would the
organization want you tied to them for that vesting period if they did not
value you or your efforts or want you there for that period?

~~~
username90
Vesting period is meaningless, you get them as a part of a salary package. If
I get shares vesting over 4 years then it just means that they are a part of
my salary. If I leave after a year I didn't lose 3 years of shares, in the
same way as I didn't lose 3 years of salary.

The only time shares are different is stock growth, and since stock on average
grows the shares will on average be worth more in year 4 than year 1. And in
some rare cases with huge stock growth you can see extremely large
compensations as a result, but otherwise they are just like normal salary.

~~~
screye
Exactly.

Almost I just view the amount that vests every year as a part of my annual
salary and that's it. The total is really immaterial.

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agentofoblivion
I have one of the happier cases perhaps. At time of hire, my target comp was
around $160k, RSUs were backloaded to mainly vest in years 3 and 4. I’m now in
those years, and stock has risen a lot. Now I’m making more like $230k. Sure,
they used that once to not give me a big raise, but I got promoted once with a
25% raise and it’s hard to complain when I’m bringing home far more than I
would have thought. So RSUs can be good.

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deepaksurti
Your loyalty is to doing your job to the best of your ability and trying to
improve as much as is realistic, assuming all other things being equal by
which I summarily mean you don't work in a toxic place.

As for RSU's, as others have mentioned, it is great to think of it as
additional money and base everything on your base pay (pun unitended). Never
sign up for a job where your base pay may vary based on RSU grants, I am
surprised to read something to that effect on this thread.

As for job security, I don't think it is a function of your role, salary base
pay or stock grants. It is a function of market dynamics and how your company
is doing well in the space it operates in, so it is our job to keep an eye on
that. If you see winds of change that may hurt you, one better ensure not
getting caught in the crossfire.

So I think it is better to be loyal to your own career and the good side
effect of that is being loyal to your role and hence your current employer!

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al_chemist
"A restricted stock unit (RSU) is compensation issued by an employer to an
employee in the form of company stock."

~~~
avionicsguy
@al_chemist Thank you! Between software frameworks and embedded systems
engineering...oh hell just being in tech. in general there are way too many
acronyms. Thank you for actually listing the definition! :-)

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zaptheimpaler
RSUs are worth more than cash if you're optimistic about the stock and worth
less if you're pessimistic. Over the last 10 years they've probably been worth
a lot more than cash if you held on instead of selling, but no one knows about
the next 10.

~~~
frank2
I disagree that RSUs can be worth significantly more than cash because the
recipient of the cash can use the cash to buy (unrestricted) stock units if he
or she is optimistic about the stock.

~~~
paxys
They can definitely be worth significantly more since RSU numbers are locked
well in advance (1-4 years).

~~~
notJim
This is the key. When I was interviewing, I had an offer of $150k + $20k
stock, and another that was just straight $190k (these are fake numbers, but
pretty close.) I told the first company about the $190k offer, and they
matched it by upping the stock to $35k, and I took that offer. Then the stock
nearly-doubled in value over the first year.

Now it's worth mentioning that the stock could have also gone down, and
frankly I am extremely skeptical of my own ability to predict this. So I
wouldn't say I selected this offer based on the potential upside of the stock.
But still, it's a nice upside.

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makecheck
I treat them as being worth $0, as an unexpected bonus. In other words,
determine what you can “afford” (rent, etc.) based on NOT seeing a penny from
an RSU.

There is no way to be exactly sure what they will be worth. Stock prices not
only go up and down but the “long term” (lower tax) date to sell them is even
further away. Even well-known companies see major shifts in stock value.

RSUs are also a different “class” of stock typically, meaning that in the
event of a catastrophe your shares are _not_ at the top of the list. Company
goes under? More important investors get their payouts first, your shares may
be worth literally zero. Less if you believe in lost opportunity costs, etc.

~~~
Kirby64
At a publicly traded company, RSUs are definitely not worth $0 and shouldn't
be treated as such. I agree you shouldn't base their value at some arbitrary
inflated number and should live within your means, but if you truly think RSUs
are worth $0, then you also think the company is going to go under (or you get
fired) before they vest.

I typically value them at some percentage of the current value of the stock
(less than 100%) depending on the company. For most signing bonus RSUs you're
getting some of them after a year anyways. That's not a long time to wait, so
risk/opportunity cost is low.

At a startup or some privately traded company, yeah sure. Their value is
effectively $0.

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SamWhited
Money (or options, RSUs, or other potential gamble that you'll get money) are
handcuffs, you can't be loyal to someone who has you in handcuffs, even very
nice ones (unless they're the fun fuzzy kind maybe, but that's a different
situation).

Save your loyalty for a nice non-profit or co-op doing some good thing that
you feel passionate about in your community, just give your employer your time
until such a time as things change and you feel it's no longer worth it.

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JMTQp8lwXL
I view them more as golden handcuffs than security or loyalty. They factor
into the opportunity cost of considering new opportunities external to your
current employer. A new job will not only have to match your base, but give
you an equal amount of stock, or an even larger base salary.

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paxys
RSUs are the best feature of the tech industry for me. It is the ideal way to
get employees invested in a company's success, and the best way to share that
success with those who made it happen.

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sys_64738
You'll know your worth to the company by how little they give you for RSUs.

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dmak
How is the volatility nature of RSUs indicative of job security?

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30Hayekliam
hack shiwo

