What is an example of vesting schedule?

Under a standard four-year time-based vesting schedule with a one-year cliff, 1/4 of your shares vest after one year. After the cliff, 1/36 of the remaining granted shares (or 1/48 of the original grant) vest each month until the four-year vesting period is over. After four years, you are fully vested.

What is the vesting schedule format?

Vesting Increments: After the cliff period (if applicable), ownership typically vests gradually over time. For example, a common schedule is to vest 25% after the first year and then an additional 6.25% each quarter thereafter until the fourth year when 100% ownership is achieved.

What is an example of a restricted stock award?

For example, an executive received a grant of 10,000 RSUs when the company's stock price was $20 per share on January 1, 2023. All shares will vest after four years on January 1, 2027. If the company's stock price remains at $20, the executive will receive stock valued at $200,000 before taxes on the vesting date.

What is the difference between RSA and RSU?

Employees acquire RSAs at grant, meaning the shares are physically set aside until the pre-set conditions have been met. This gives employees ownership rights, including voting and dividend rights, before vesting. In contrast, RSUs are not physically set aside for employees at grant.

How do you account for restricted stock awards?

Restricted stock awards are considered ordinary income with regard to ordinary income tax. Furthermore, this income is usually recognized on the vesting date of the restricted stock. The vesting date is the date on which the stock can be transferred or sold by the grantee.

What does an RSU vesting schedule look like?

Graded Vesting For example, imagine an employee receives 10,000 RSUs with a four-year vesting schedule. Each year, on the anniversary date of the grant, one-quarter of the total RSU amount vests (2,500 shares). Typically, once each amount vests, the employee is allowed to sell the shares.

What is an example of a RSU vesting schedule?

RSU vesting schedule In time-based vesting, a certain percentage of RSUs become vested at regular intervals over a specified period. For example, an RSU grant might vest 25% each year over four years, with the first portion vesting after the first year and subsequent portions vesting quarterly or annually after that.

What is an example of a RSU vesting?

RSUs may have additional vesting conditions beyond the vesting period. For example, a company may grant 300 RSUs that vest over three years, so each year the employee receives 100 shares of the stock.

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