This job perk is like a ‘cash bonus’ — but you need a long-term strategy, experts say

Restricted stock units (RSUs) are a form of employee compensation where employees receive company stock over a fixed schedule.

In recent years, RSUs have become increasingly common, with the majority of public companies now offering them to at least mid-level employees.

When an employer offers RSUs, it’s essential to develop a comprehensive financial plan to manage them effectively.

RSUs are typically granted upon hiring or based on employment milestones.

Employees may receive a lump sum of RSUs initially, followed by smaller grants over time.

As RSUs vest over time, employees have the option to sell them or hold them.

However, before making a decision, it’s crucial to consider factors such as short-term and long-term financial goals, the amount of company stock already owned, and the company’s growth potential.

Tax implications are an important consideration with RSUs.

Employees are subject to regular income taxes on the market value of shares as they vest.

It’s important to be aware of the tax withholding rate set by the company, as it may not be sufficient to cover the actual tax liability.

In the event of selling shares, the taxes depend on the holding period.

Shares held for more than one year are subject to long-term capital gains, which are taxed at lower rates, while shares held for one year or less incur regular income taxes.

Overall, RSUs can be a valuable part of an employee’s compensation package.

However, it’s imperative to have a well-informed approach, understand the tax implications, and align RSU management with overall financial objectives.