What Is Restricted Stock?

Type	Definition	Purpose
Restricted Stock Units (RSUs)	A promise from the company to give a specific number of shares at a later date.	Reward employees for their contributions and align their interests with those of the company.
Restricted Stock Awards (RSAs)	The right to buy shares at a discounted or free price at a later date.	Incentivize employees to stay with the company and motivate them to perform well.

What Are Restricted Stock Units (RSUs)?

Restricted Stock Units (RSUs) are a form of equity compensation that gives employees the right to receive a certain number of shares of company stock at a future date, typically when they leave the company or retire.

RSUs are often used as a long-term incentive to encourage employees to stay with the company and perform well. They are also used to attract and retain top talent.

How Do RSUs Work?

When an employee is granted RSUs, they are not immediately given the shares. Instead, they are given a promise that they will receive the shares in the future, subject to certain conditions, such as staying with the company for a certain period of time or achieving certain performance goals.

Once the vesting period is over, the employee can choose to either sell the shares or hold onto them.

What Are Restricted Stock Awards (RSAs)?

Restricted Stock Awards (RSAs) are another type of equity compensation that gives employees the right to buy shares of company stock at a discounted price or for free.

RSAs are often used as a short-term incentive to encourage employees to perform well. They are also used to attract and retain top talent.

How Do RSAs Work?

When an employee is granted RSAs, they are given the right to buy a certain number of shares of company stock at a specified price, typically below the market price.

The employee can choose to exercise their RSAs at any time during the vesting period. Once the vesting period is over, the employee can choose to either sell the shares or hold onto them.

Benefits of Restricted Stock

There are several benefits to offering restricted stock to employees:

• It can help to attract and retain top talent.
• It can motivate employees to perform well.
• It can help to align the interests of employees with those of the company.
• It can be a tax-efficient way to compensate employees.

Conclusion

Restricted stock is a valuable tool that can be used to attract, retain, and motivate employees. It can also be a tax-efficient way to compensate employees. If you are considering offering restricted stock to your employees, it is important to consult with a qualified financial advisor to ensure that you are doing so in a way that is beneficial to both your company and your employees.