How Do RSUs Work? RSUs at Amazon, Google, Apple, Tesla & Microsoft
If you’re looking for good information and resources to help you better understand how single-trigger RSUs work at a publicly-listed company, you’re in luck! In this article, we’ve compiled everything you should know about how RSUs work at the 5 tech giants: Amazon, Google, Apple, Tesla, and Microsoft.
Amazon Restricted Stock Units
Resource 1 (amazon.jobs) : Amazon Company Stock & Restricted Stock Units
With its massive size, it's not surprising that Amazon has some pretty awesome benefits. One of these is the ability for employees to obtain equity or company stock through single-trigger Restricted Stock Units (RSUs), which are taxed as ordinary income.
Depending on their job level and their scheduled work of 30+ hours per week, employees can be granted RSUs that vest over time.
Resource 2 (resilientam.com) : Amazon RSU Compensation
There are typically two key elements to Amazon's compensation structure:
- Cash -Employees receive cash every other month as a wage for showing up and doing their job.
- Amazon RSUs - Amazon employees get single-trigger RSUs, which represent shares of the company stock. This form of equity compensation is great because it encourages employees to think like owners and do what's best for the company in both the short and long term. Collectively, this benefits not only those who receive RSUs but all stakeholders.
Resource 3 (avieradvisors.com) : Amazon Employee RSU
The longer employees stay with Amazon, the bigger their equity and payout from the company RSUs' fair market value at the vesting date.
Employees can expect different vesting schedules, but the most common is over a period of four years.
There's minimal tax burden when the Amazon RSU grant vests, as the tax liability applies only upon the delivery or vesting of RSUs. With RSUs, the company also doesn't have to pay dividends on the equity granted. Also, at Amazon, some employees get additional refresher RSUs while working.
Amazon employees are aptly rewarded with company shares through RSUs and other substantial incentives for being loyal team members.
Apple Restricted Stock Unit Awards
Resource 4 (seedsafefinancial.com) : How do Apple RSUS work
Employee compensation is also multi-faceted at Apple, especially for highly valued executives. One Apple restricted stock unit is worth one share of stock in the company. Apple uses RSUs with single-trigger acceleration, and the equity vests over time based on the vesting schedule.
Unlike stock options, which require you to pay capital gains tax, restricted stock units have an ordinary income tax when they vest. Instead of an Apple RSU grant recipient being required to pay taxes on the capital gains of the shares awarded at the vesting date, taxation is similar to their wages or regular salary.
Resource 5 (myapplestock.com) : Apple Restricted Stock Units
The process here is similar to that of Amazon. If an employee helps the company perform well, stays employed throughout the vesting schedule, and adheres to the RSU agreement provisions, the total number of restricted stock units are released over a pre-determined number of years and at fair market value of the company's stock.
Ordinary income tax applies to vested Apple RSUs instead of tax liability based on capital gain.
Resource 6 (rivermarkwealth.com) : How does Apple stock vesting work?
As per Apple’s Restricted Stock Unit Agreement with its employees, shares can be exercised within thirty days following the vesting date.
Google Restricted Stock Units
Resource 7 (eqvista.com) : Google Employee Benefits
In the 20 years since Google has been around, it grew from merely a search engine to having a vast array of different products and services, from Gmail to YouTube.
To keep up with its growth and innovation, Google strives for employee satisfaction by providing workers with great benefits that, unlike stock options, have a tax liability similar to ordinary income.
They do this by offering Google RSUs, which can be worth millions upon receipt.
Resource 8 (myrawealth.com) : How Does Google RSU Work?
Google's restricted stock units vest evenly over a period of four years.
Microsoft Restricted Stock Units
Resource 9 (avieradvisors.com) : Does Microsoft give RSU?
As opposed to an employee stock option, Microsoft employees are often granted single-trigger restricted stock units as part of their compensation package.
In fact, the RSUs make up a significant portion of many Microsoft employees' total earnings.
Resource 10 (avieradvisors.com) : When Do Microsoft Employees Receive Restricted Stock Units
Microsoft employees receive RSUs in two ways:
- On-hire stock awards - The vesting schedule is typically 25% per year over four years. Employees only get on-hire stock awards following the completion of their first year with the company.
- Annual stock awards - Microsoft gives out new stock awards to employees every August.
Tesla Restricted Stock Units (RSUs)
Resource 11 (barrons.com) : Does Tesla give stock to employees?
As a company, Tesla has an employee stock purchase plan that allows workers to buy up to 15% of their total compensation at 85% off of the current stock price, subject to limitations.
Resource 12 (levels.fyi) : TESLA RSU Vesting Schedule
Tesla offers a range of shares, from simple options to single-trigger RSUs that are valued based on the company's stock price.
This is done for investors to have greater control over their investments in the organization. The bonus structures also give employees incentives based on how long they've been working and the value they bring to the company.
Tesla's equity plan is subject to a four-year vesting schedule: 25% goes into effect after one year, followed by another 25 percent for each succeeding year.
Restricted Stock Units for Private Companies
You now know the answer to the following question: "How do Restricted Stock Units work at the biggest tech companies?"
Note that public companies that have had initial public offerings (such as the tech giants mentioned above) use single trigger RSUs.
Private companies (those that have not had IPOs) are better off using double-trigger RSUs. Private companies don’t use single-trigger RSUs for the following reasons:
- Equity shares are locked up and/or not liquid
- Potentially enormous tax implications
Double-trigger restricted stock units, on the other hand, tie the granting of equity to a liquidity event. As their name suggests, double-trigger RSUs require two events to completely vest. The first trigger is typically an agreed-upon number of years a worker is employed with the private company, while the second trigger for vesting is a company liquidity event, i.e. a sale or IPO. Furthermore, RSUs with double-trigger acceleration are better for private companies for these reasons:
- Unlike stock options, workers don’t have to buy them
- No extra workers on the capitalization table when the equity is granted
- Lower legal bills for the company
- More security as they don’t go underwater or lose value
- Workers only pay tax when the company is successful
- Only ordinary income tax rates apply at the vesting date
Double-trigger restricted stock units have become very popular among private companies, particularly tech startups. The equity structure aims to align the interests of the company and its employees.
Implement an Employee Equity Compensation Plan with Upstock
A stock grant through double-trigger RSUs for private companies can be beneficial for motivating your employees. If you are interested in learning more about how double-trigger RSUs work as employee equity, we’d be happy to provide additional information and answer any questions. Book a demo here!
Disclaimer: The information provided in this blog post does not, and is not intended to, constitute legal, business, and/or investment advice. All information, content, and materials are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information, and accessing this information does not generate attorney-client privilege.
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