RSU/Restricted Stock Unit
A restricted stock unit, or RSU, is a promise from an employer to give an employee shares of company stock in the future, once certain conditions are met. It is not stock itself when granted — it is a right to receive stock later, which is why it is "restricted."
RSUs work on a vesting schedule: a timeline (and sometimes performance targets) that determines when the employee actually receives the shares. A common pattern is vesting over four years, with a chunk of shares delivered each year or quarter. Until a batch vests, the employee owns nothing tradable; once it vests, the shares land in a brokerage account and the employee can hold or sell them like any other stock.
The nuance that trips people up is taxation timing. RSUs are taxed as ordinary income at the moment they vest, based on the stock's value that day — not when the employee eventually sells. Employers typically withhold some shares automatically to cover that tax bill. Any further gain or loss after vesting, if the employee holds the remaining shares before selling, is then taxed separately as a capital gain or loss.
RSUs are different from stock options, which give the right to buy shares at a fixed price — RSUs simply become shares outright once vested, so they retain some value even if the stock price falls, whereas options can end up worthless.
This term depends on a rule or threshold that changes over time, so no specific figure is quoted here. The definition avoids stating specific tax withholding rates or vesting-period norms since these vary by employer, jurisdiction, and tax law. Anyone publishing this should confirm current tax treatment of RSU vesting (ordinary income timing, withholding rates) against current IRS/local tax authority guidance, as these figures change and differ by country.
A day trader who also holds a job with RSU compensation should know that a big vesting date can create a wave of sell orders (including forced tax-withholding sales) hitting a stock, and that RSU-heavy employees selling en masse around vesting dates is a factor some traders watch in that company's shares.
Maya is granted 4,000 RSUs when she joins a company, vesting 1,000 shares per year over four years. At her one-year vesting date the stock is trading at $40, so 1,000 shares vest worth $40,000, taxed as ordinary income that year; the company withholds some shares to cover that tax, and Maya keeps the rest, which she can now sell or hold like any other stock she owns.
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