

RSUs are type of employee compensation program that help organization incentivise employee retention by offering them a share of company's stock after completion of a specified vesting period. These shares are not owned by the employees at the time of granting, however, once they have been vested, the employee gains full ownership of RSU stocks and they can decide to keep them, sell them, or collect any earned dividends.
Feature |
Single-Trigger RSU |
Double-Trigger RSU |
---|---|---|
Vesting Trigger | Time-based (e.g., cliff vesting, service years) | Time-based and Exit Event (IPO, Acquisition) |
Employee Ownership | Shares vest and become employee property over time | Shares vest upon exit event, employee may not own any shares until then |
Employee Retention Incentive | Moderate (encourages staying for vesting period) | High (encourages staying until exit for full value) |
Alignment of Interests | Encourages employees to contribute to company success | Strongly aligns interests, employees invested in long-term success |
Value of shares on vesting date: The shares are considered as ordinary income in the year it vests. Hence, they taxed in a similar fashion as their salary at marginal income tax rates.
Growth in value after vesting: If the employee decides to sell the shares at a later point, the profit earned between the vesting price as on vesting date and the selling price is taxed as a capital gain.
Employees are granted SARs at a specific price on a particular date.
Improve employee productivity and motivation as they are tied to company's success through RSUs.
RSUs may be the ideal choice. If you want to avoid the complexities of monitoring option exercise prices and dilution, while also streamlining the accounting process.
Employees don't have to pay upfront or make decisions about exercising options. The company grants and automatically vests the shares, removing financial risk for employees.