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Comment by oh_sigh | Hacker News Reader

But if you were just paid more salary, you would perhaps invest that excess in the market, and you would have equal time in the market. Also, you need to pay taxes on the market value of RSUs at vesting time so it isn't like you can get away with some kind of pre-tax investment scheme.

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This isn't right because you're granted the stock when you start, and can sell when you vest vs with your salary you can only invest it after you receive it. Here's an example. Let's say you get hired today with a package that amounts to $200k salary + $100k/yr RSUs over 4 years at a public company. Let's also say the stock is increasing at a rate of 10%/year.

Year 1: $200k salary + $110K stock = $310k TC

Year 2: $200k salary + $121K stock = $321k TC

Year 3: $200k salary + $133K stock = $333k TC

Year 4: $200k salary + $146K stock = $346k TC

Without any kind of raise or refresher grant you're making 15% more total in year 4 than when you started. When the stock vests, you pay tax as if it were ordinary income, and you can sell immediately for cash.

That example was for a stock growing at 10%. Now consider if that company was Alphabet.

Stock price for GOOG on Jan 1, 2019: 1116

Stock price for GOOG on Jan 1, 2020: 1434 (+28%)

Stock price for GOOG on Jan 1, 2021: 1835 (+27%)

Stock price for GOOG on Jan 1, 2022: 2753 (+50%)

Sure. Now consider the opposite where the stock flatlines for 4 years whereas the market otherwise goes up. Not as good of a deal any more.

Then its exactly the same as if your salary were 110K higher each year, so its no longer a better deal, but its not a bad one unless the stock (significantly) underperforms whatever your normal investment mix would be.

It's less about getting away with not paying taxes and more about the fact that RSUs are basically a big negative-interest loan to invest in the company's stock, which can be incredibly lucrative in the growth sector.

It is only negative interest if the stock goes up. It is positive interest if the stock goes down. So you could call it a variable rate loan to invest in the company's stock. I would not choose to take out such a loan against the growth rate of the company I also rely on to pay my salary.

I would actually like RSUs more if they granted me shares in a basket of stocks of competitor companies. At least then it would hedge my already high exposure to the fortunes of the company I work for.

If the stock goes down, you can walk away from the arrangement without being on the hook for anything. If it goes up, you collect a salary while having exposure to the company stock without having to put up any of your own capital.

I am not seeing where the positive interest is here.

Relative to just being given the cash instead of the equity.

But with RSUs, you lock the purchase price in at the time of hire. So if you are granted a four-year grant in 2022, you get RSUs of stock in 2026, but at the 2022 price. So if you're granted $1k/month of RSUs, and the company stock doubles in that four years, each month you get $2k worth of stock.

Your employer won't do that with salary.

As you say your getting a much better tax advantage and can use capital Gains to reduce the tax rate.

Though compared to the US the UK has much better treatment of "employee" share schemes. The most common Sharesave is effectively a risk free investment at a 20% discount.

I am surprised if the Google union hasn't got fairer treatment of stock options on its agenda and I do mean for all employees.

> As you say your getting a much better tax advantage and can use capital Gains to reduce the tax rate.

This isn't true. RSUs are taxed as income at vest time, so if you're granted 100K in RSUs in 2020, and they vest in 2023, come 2023, if the stock has increased 25% to 125K, you'll be taxed on 125K of income. No capital gains involved anywhere.

Ah sorry was looking with a UK perspective - the USA really doesn't want the little people accumulating capital does it.

https://frazerjames.co.uk/rsus-a-tech-employees-guide/ seems to suggest that it works the same way in the UK. Are you perhaps confusing RSUs with options?

It's actually even worse in the UK. If you get a grant in the UK, you still owe taxes when it vests, even if you've left the UK years ago.

HMRC Approved schemes only from Share Save through EMI (the gold standard)

If you get RSU's in an American parent company your screwed its just income there's some calculations on the relevant redit r/UKPersonalFinance - basically its treated income and you also don't get the legal protections

as the site says "The UK tax treatment for RSUs is similar to how your salary is taxed."

The example shown on the site you quote has a 56.53% effective rate - don't forget you pay NI as well

As I said very poor I paid zero tax on my two share saves and my current EMI is at the 10% rate.

Update the 56.5% rate is after you put 20k into pension the actual rate is just under 70%

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