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RSUs and Equity Explained: What Your Offer Is Worth

Equity is where tech offers hide both their upside and their fine print. Two offers with identical "total compensation" can differ by six figures over four years once you account for vesting schedules, refresh policies, and what kind of paper you're actually being granted. This guide gives you the working vocabulary and the valuation habits to compare packages honestly — the raw material for the negotiation itself.

The instruments

  • RSUs (Restricted Stock Units). A promise of real shares delivered on a vesting schedule. At public companies, an RSU is worth the share price on the day it vests — simple, liquid, and taxed as income at vest. This is the standard grant at every large public tech company.
  • Stock options (ISOs/NSOs). The right to buy shares at a fixed strike price. Worth something only if the company's value rises above the strike — and worth nothing if it doesn't. Standard at early-stage startups, where the lottery-ticket shape is the point.
  • Double-trigger RSUs. Late-stage-startup RSUs that only fully vest on both time and a liquidity event (IPO or acquisition). Time-vested but pre-liquidity means you may hold paper you cannot sell — value it accordingly.

Vesting: when it becomes yours

A grant is a schedule, not a lump:

  • The classic: four years, 25% per year, with a one-year cliff — leave in month eleven and you get nothing.
  • Monthly/quarterly after the cliff is now common and worth checking; it changes how much you forfeit by leaving mid-year.
  • Front- and back-loading. Most companies vest evenly (25/25/25/25); a famous exception back-loads (e.g. 5/15/40/40), which dramatically raises the cost of leaving early. Always ask for the year-by-year split, not the total.

Refreshers: the number nobody quotes

The initial grant is what recruiters headline; refresh grants — new annual grants layered on top — are what determine year-3 and year-4 income. At companies with healthy refresh cultures, tenured engineers stack overlapping grants; at companies without, compensation quietly falls off a cliff as the initial grant finishes vesting.

Questions worth asking directly: "What does a typical annual refresh look like at this level and rating?" and "What's the median total comp for someone in their third year at this level?" A recruiter who can't answer the second question is telling you something.

Valuing what you're offered

  • Public company RSUs: count them at face value (shares × current price), then stress-test: the same grant at ±30% share price is the realistic range you're signing up for. Never assume growth when comparing to a cash-heavier offer.
  • Startup options: face value is meaningless. What matters: your percentage of fully-diluted shares, the strike vs. the latest 409A/preferred price, expected dilution from future rounds, and honest odds of exit. A defensible habit is valuing private options at a small fraction of the "paper" number — and negotiating salary as the part you can eat.
  • Compare over four years, per year. Lay out salary + bonus + vesting-schedule equity year by year. Back-loaded schedules and absent refreshers show up immediately in this view and vanish in a "total package" summary.

Tax, briefly

RSUs are taxed as ordinary income when they vest (most companies sell-to-cover automatically); anything after vest is capital gains territory. Options are where real complexity lives — exercise windows, AMT on ISO exercises, and the brutal 90-day post-departure exercise deadline most startups still impose. The rule of thumb: RSU tax mostly takes care of itself; before exercising startup options, pay for an hour with a professional. It's the cheapest insurance in tech.

What this means at the negotiating table

Equity is usually the most movable component of an offer — large initial grants are easier to approve than off-band salaries, and a sign-on bonus can bridge the vesting cliff of the grant you're walking away from. Bring the year-by-year model to the conversation, and read the negotiation playbook for how to convert it into a counter. If you're weighing more than one offer, our competing offers guide covers the sequencing.

Weighing an offer right now? Get matched with a coach who has seen hundreds of packages and can pressure-test yours before you sign.