What happens to your equity comp RSUs if you are laid off?
Being let go is never easy, but the way these tech companies are handling it is as awkward as a 10th-grade me trying to ask a girl to a dance. I don’t know if it was because they have never really done much but hire or grow and they don’t know how to handle mass layoffs, or if there is some sort of malice; regardless, this process has been emotionally tough for many. To add to the fear, frustration, and confusion, many employees wonder what happens to my equity compensation, like RSUs?
The finance industry is notorious, or maybe infamous, for using hard-to-understand lingo. So before we start, a quick reminder that RSUs stands for Restricted Stock Units.
A grant of RSUs is the employer saying if you stick around long enough, we will give you a certain number of shares of company stock. “Long enough” is called vesting. Vesting is usually done gradually over time. Once vested, the actual shares of company stock are formally released to the employee. Once owned by the employee, they can do what they want with them, sell them, keep them, whatever.
A good first step is to inventory all of your equity compensation, including your RSUs. Knowing what you have will help you make better decisions. Valuing equity compensation can be tricky, but the value on your statement is a good starting point.
Granted & Vested
If the RSUs are vested and you own the actual shares of stock, being laid off makes no difference. You can take them with you. At this point, the main things to consider are whether you should sell your shares to help fund an emergency-type fund to fund your transition as you look for work, or whether you should take this opportunity to decrease concentration risk. Don’t sell out of panic or anger, but you have an asset that can be turned into cash; now is the time to explore your options.
But what about the RSUs that still need to vest?
Granted & Not Vested
From an RSU perspective, being laid off is viewed the same as quitting, and they are forfeited — you lose them. This makes sense if you quit, but it really sucks if you are laid off. The company might accelerate the vesting schedule as part of the severance or give you more time, just to be nice. But don’t be afraid to ask! Negotiate.
Negotiating might not be needed if you have been with the company for a while and are of a certain age. In that case, you might qualify for a “retirement” clause, and the company might accelerate the vesting schedule or give you extra time after separation without negotiating.
Lastly, if you move to another employer after a layoff or in anticipation of a layoff, try using the abounded equity compensation as part of your job negotiation. Here at Sona, we often help clients value equity compensation when they are weighing job offers.
Being laid off is never easy, especially with high inflation and the threat of a recession on the horizon. But if we focus on the positive and what we can control, the outcome is usually good, maybe even better than before. Sometimes things happen for a reason.