RSUs or Cash?

nelson687

I joined a company where they give me the option to choose, as an incentive program, RSUs, stock options, or directly cash.

I'm a bit confused about the tax implications between the options. I was most interested in RSUs, but then I'm lost with the cash option.

If I choose RSUs, is that exactly the same as if I chose cash and then buy my company stocks? or is it different in terms of taxes?

having the option to select cash, I don't understand why I would select RSUs, with cash I can diversify my investments also buying stocks from a different company. What are the advantages of getting RSU vs cash if I want to invest the cash in stocks anyway?

EdSwippet

Every RSU scheme I have seen(*) treats the vested RSU value in exactly the same way as a cash bonus, so unless your employer offers some sort of 'uplift' for choosing RSUs, then of the two, a simple cash bonus would strictly be better. More flexible, less hassle. As you have perhaps already determined.

For real employee stock options and other employee incentive schemes though, there could be some tax benefit, depending on the type of plan. Not my area I'm afraid, so nothing from me on these.


(*) Personal experience is exactly one scheme(!), but from reading around I believe this treatment is the standard, and mandated by UK law.

Daniel54

Like Ed,I have read around the subject but only have experience of my own company scheme ( UK employee of a large US quoted company.)

I think it is worth you digging deeper into how the alternatives work

My own scheme went through a phase where you could uplift the total bonus to 110% by taking more in RSUs ( which are always taxable as income on vesting) and less in cash.It then moved to an obligatory  fixed percentage in RSUs, so no choices to be made. 

Unless they are offered at a discount to the market price, options have nil value at the date of grant.Typically therefore you would expect the number of options granted to be a multiple of an RSU - so I had a couple of schemes where I could have swapped one RSU for four options

Options as part of remuneration are subject to tax as income at the date of exercise, being the difference between the share price at the date of grant and the share price at the date of exercise.If they come in underwater ,then obviously no tax to pay.

This is how my scheme(s) worked but there may well be some wrinkles in the details of yours.