Restricted Stock Units (RSUs) are the equity compensation tool of choice for most publicly-traded companies. RSUs are granted as a means to help motivate and retain employees, but what happens to your RSUs if your employer decides to lay off a large portion of its workforce?
Unfortunately, many public companies are laying off employees. We’ve already seen large-scale layoffs at big companies like Meta, Amazon, Twitter, Stripe, Salesforce, etc. If you’re at one of these companies experiencing layoffs, it’s likely you have RSUs and are probably wondering what happens to your RSUs should you get laid off.
The purpose of this article is to examine what happens to your RSUs if you get laid off.
If you’re really wanting to dive deep with RSU knowledge, here’s every article on RSUs we’ve written (17 total). We also recommend checking out “Consider Your Options” by Kaye Thomas (paid link).
Understanding Vested & Unvested RSUs
Receiving a grant of RSUs is essentially a promise from your employer saying that they are willing to give you X number of shares provided you stick around for a certain period of time.
Once you’ve worked at the company for that agreed-upon period of time, your employer releases company shares to you and, at that point, those shares go from being RSUs to being company shares owned outright by you.
In other words, Vested RSUs are company shares that you now own outright. Unvested RSUs are company shares that have been promised, but that haven’t yet met the company’s time condition.
This is one of the most upsetting things about being laid off with RSUs; it sometimes means thatyou lose control of your ability to fulfill the time requirement for vesting.
Being Laid Off With Vested RSUs
If you end up being laid off, the good news is that the vested portion of your RSUs remains yours.
Since shares of company stock are released to you upon a vesting date, any RSUs that vested are now shares that you own outright. And since you now own company shares outright, being laid off has no bearing on what happens to those shares.
Being Laid Off With Unvested RSUs
This is the sad part. Being laid off with Unvested RSUs typically means you’ll lose the right to receive company shares in the future. Any Unvested RSUs will likely be returned to your employer.
Since your company has made a promise to release RSUs only after you’ve worked there for some previously designated length of time, being laid off directly impacts your ability to meet that time requirement.
If you’re being laid off, you’ll want to carefully read any sort of severance agreement you’re given, because sometimes companies will accelerate the vesting of some or all RSUs as a gesture of goodwill (though we don’t see this often).
What to Do If You’re Laid Off With RSUs
While being in this situation is far from ideal, we have a few recommendations for you should you get laid off with RSUs.
If your company is offering severance packages, check to see if accelerated vesting or partial accelerated vesting is on the table. If you’ve received large grants of RSUs and are only a month or two away from the vest date, some companies will be willing to pay out a portion of that anticipated value at the time of your layoff.
If you’ve had RSUs vest over the years, now might be a good time to reevaluate your stance on holding shares of your soon-to-be ex-employer. It might finally be time to diversify into other investments.
We don’t recommend making emotional decisions here. “Sell All” orders may feel satisfying at the moment, but they might not be the answer. On the flip side, if you’re being laid off from a company that initially you had “googly-eyes” for and never sold any company shares, a pink slip may leave you wisened and bit more stoic about a decision to sell.
Consider filing for unemployment. Every employer you’ve ever worked for has been paying something called FUTA taxes and it’s likely a benefit for which you are now eligible. Filing varies state by state, but we highly recommend doing some research on your own to see what you’re eligible for.
It may seem counterintuitive, and maybe too soon to think about, but at your new job it may be worth negotiating for more RSUs due to the fact that so many tech companies are at their low point stock-wise in years. If that isn’t something you’re interested in, then we recommend at least trying to convert potential RSU compensation into additional cash compensation instead.
It totally sucks to lose RSUs due to a layoff. You’re welcome to shoot us an email and we’ll send you a “Hang In There Baby” cat meme to cheer you up.
We understand that situations like this are tough to get through, but the odds are that you’re a super capable employee and you will absolutely crush it at your next gig. We wish you the best of luck!
