Restricted stock unit (RSU)

What is a restricted stock unit (RSU)?

A restricted stock unit (RSU) is a form of equity compensation that grants employees the right to receive company shares. This is typically after meeting certain conditions, such as a vesting period, continued employment, or performance milestones.

RSUs are commonly used by startups, public companies, and tech firms to attract and retain talent while aligning employee incentives with company performance.

Unlike stock options, RSUs do not require the employee to purchase shares; instead, the shares are delivered automatically once they vest. At the point of vesting, the value of the shares is considered taxable income, and depending on the jurisdiction, the employer may be required to withhold taxes.

For example, an employee may receive 1,000 RSUs that vest over four years, with 25% vesting each year. At each vesting point, the employee receives a portion of the company shares, either issued directly or held in a brokerage account.

Why does this matter for employers?

RSUs are a powerful tool for talent acquisition and retention. They provide employees with a direct stake in the company’s success, which can improve motivation, reduce turnover, and conserve cash (since no immediate payment is required at the time of grant).

However, offering RSUs requires:

• A well-defined equity compensation plan
• Clear communication of vesting schedules and conditions
• Understanding of tax implications in the employee’s jurisdiction
• Coordination with legal, finance, and payroll teams to manage issuance and reporting

RSUs are also subject to securities laws and must be managed carefully for compliance, especially when offered to international employees.

How can Remote help?

If you plan on creating the legal documentation and offering RSUs, Remote can provide support from a tax withholding and reporting perspective.

Alternatively, we can help you create, provide, and manage other types of equity incentives for your team, even if they are located in different countries. Learn more.