More jobs now pay part of your compensation in company , and not only at tech giants. The two forms you're most likely to meet are restricted stock units (RSUs) and employee stock purchase plans (ESPPs). Neither is complicated once you see when the tax happens and what risk you're carrying.

RSUs: a bonus that arrives as shares

A is a promise: stay employed here, and on certain dates you'll receive shares. The schedule is called , commonly a chunk each quarter or year over four years, sometimes with a one-year cliff before anything vests at all.

The tax is simpler than people fear. On the day shares vest, their market value counts as , the same as salary. It lands on your , and your employer typically withholds some shares to cover the tax, the way taxes come out of a paycheck. From that day forward, the shares are ordinary stock you own: hold them, and any further gain or loss follows the regular capital gains rules, measured from the price at vest.

Vested RSUs are a cash bonus your employer paid in shares. Ask yourself: if the bonus had come as cash, would you spend it buying your company's stock? If not, selling at vest is consistent, not disloyal.

That's why the sell-at-vest default is respectable. You owe the income tax either way, and selling immediately adds little or no extra tax, since the shares have barely moved since vesting. What selling does is turn a concentrated bet into money you can .

ESPPs: buying at a discount

An lets you set aside part of each paycheck (often up to 10% of pay, capped at $25,000 of stock per year by IRS rule) to buy company shares at a discount, commonly 15% below market price. Many plans add a lookback: you pay the lower of the price at the start or the end of the purchase period, which can stretch the discount further.

Bought at a 15% discount and sold promptly, the shares lock in that gain, minus some tax on the discount, which counts as ordinary income. After the , an ESPP discount is often the closest thing to free money in a compensation package. The tax paperwork is fiddly, but your plan documents and tax software sort most of it.

The risk both of them share

Concentration. Your paycheck already depends on your employer; stock compensation stacks your on the same company, so one bad year for the business can hit your income and your savings at once. Employees of collapsed companies have learned that lesson the hard way. Risk and Diversification covers why spreading out matters, and with employer stock the case is doubled. A common rule of thumb is to keep any single company, especially the one that signs your paychecks, under about 10% of your portfolio.

Reading in a job offer

  • The vesting schedule. Four years with a one-year cliff is standard; anything slower deserves a question.
  • What the grant is worth today, not the recruiter's projection. Private-company shares can stay unsellable for years, and may end up worth nothing.
  • Refreshes. Ask whether new come annually or your equity flatlines once the initial grant vests.
  • ESPP terms. The discount percentage, and whether there's a lookback.

Equity is one line in a bigger picture; Reading a Job Offer walks through the rest. When the shares arrive, treat them like the paycheck they are: take the guaranteed part, and be deliberate about how much of your future stays riding on one .