Should I take Pay rise vs Stock

NoNameHere

Recently my employer has offered people stock instead of or as a combination with pay rises. These stocks aren't small (in the £10ks+) but they have to be held for 4 years and of course with stocks, can depreciate in value.

I feel like my employer is doing this to save some money and not give us a full pay rise (but i lack the financial literacy to prove it!)

Can I refuse the stock option and instead negotiate a better pay rise, is this something in law they have to respect?

What would you do in this situation?

El_Torro

Legally they don't have to offer you a cash alternative. They might say it's the stock or nothing, though there's no harm in you asking (politely).

Is it a large company? Is it a start up that is unlikely to see 2027? Based on what you've said it's basically impossible for us to judge the likelihood of the company still existing in 4 years time. Up to you how much information you want to give us, though as always best not to overshare and give us info that can be used to identify you.

I suspect that if they are doing this because the company is in financial trouble (this may or may not be true) then the chances of you getting a pay rise instead of the shares is basically zero.

Undervalued

https://forums.moneysavingexpert.com/discussion/6672792/should-i-take-pay-rise-vs-stock

There is no legal entitlement to a pay rise, ever, unless your pay were to fall below the national minimum wage! So, anything beyond that is a matter for negotiation and mutual agreement.

One further thought, should the firm collapse the stock MIGHT not just depreciate, it could become worthless!

Woodstok2000

Even if the company isn't in financial trouble, there are many reasons they may prefer to pay in stock rather than cash, not least the direct impact on their bottom line for this year.

My current employer has strict rules about performance payments, so if performance meets those criteria they cannot avoid paying bonuses or pay rises. When performance has missed targets marginally, or for unexpected reasons (e.g. covid) they have often been a bit more creative by using stock incentives to allow them to make payments to staff without going through the formal scheme.

As noted above, no harm in a polite enquiry but do not be surprised if the answer is no, or if the value of a cash incentive is significantly lower than the stock value.

born_again

How well hve the stocks been performing over the last couple of years. Not to forget that capital gain tax might come into play here down the line.

DRS1

Are the shares quoted on a stock exchange? If not then how are you going to sell them once the 4 years are up?

Also what happens if you leave in those 4 years? If the shares are meant to ensure you stick around for 4 years then they are unlikely to offer you a pay rise as an alternative.

Being offered a share incentive is usually a good thing. You could look on it as meaning they value you more highly than someone they just give a pay rise to. Of course it does mean you are expected to contribute to the employer NOT becoming a financial basket case.

Woodstok2000

https://forums.moneysavingexpert.com/discussion/comment/82037087#Comment_82037087

Hopefully no cgt if the shares don't vest for 4 years and you sell them straight away.

MyRealNameToo

https://forums.moneysavingexpert.com/discussion/6672792/should-i-take-pay-rise-vs-stock

Given the value of the stocks value presumably you arent on minimum wage and therefore you have no right to any pay rise or stocks, of cause you can try and negotiate but its not something "they have to respect".

As payrises are often a percentage, either how they are calculated or at least sense checked, then a pay rise now will compound over time however only need to look at SpaceX's IPO which made 4,400 millionaires and estimated 400 with $100m or more from their stock options.

Of cause stocks are a punt and whilst SpaceX was great for those that took stock rather than a 2% pay rise the company could have also have collapsed and the stock become worthless.