Google employees often find that they are met with generous compensation packages. Google Stock Units (or GSUs) are often a large part of your compensation package, which is great, but let’s unpack how these work and how they are taxed. 

Google offers GSUs with the idea that employees who receive a share of the company’s stock will be more invested in the company as a whole. The only catch is that your GSUs aren’t really worth much upfront when you first start employment (because they haven’t vested yet). Here’s what you need to know about the Google stock vesting schedule.

Google Restricted Stock Units (GSUs)

Restricted stock units are used by many tech companies as part of robust compensation packages for their employees. You may have heard of these as RSUs, but Google changed the acronym to be more specific to their culture. At Google, they are known as GSUs, and it’s crucial to understand what you can expect from this part of your compensation.

No matter what happens to the price of a share of Google stock, your GSUs will always maintain some value as long as Google is still in business. Depending on the stock price when you first agreed to the compensation plan with GSUs, their total value may go up or down. 

However, note that they always have some value when they vest. You have multiple options for what to do with these stocks when you can finally claim them, which we will cover a bit later on.

When are GSUs Received? 

If you’re in the midst of the hiring process at Google, then it might be time to broach the subject or to look closely at your contract for the promise of GSUs. This is often a major component of the compensation packages offered to their employees upon hiring. Of course, there are no hard and fast rules on how many GSUs they may offer you. 

The good news is that you can often negotiate the number of GSUs depending on how you prefer to be compensated. Some people are okay with taking a lower salary in exchange for more GSUs in their investment portfolio at the end of their vesting schedule. Others may prefer a higher salary in lieu of a significant investment in GSUs (which can be volatile!). Be sure to bring this issue up in your negotiations and think through what you really want. 

What is the Google Stock Vesting Schedule? 

A portion of your GSUs vest each year, depending on the start date of your employment.  

Unlike Microsoft’s stock vesting schedule, which vests equally across four years, the portion of GSUs that vest for Google employees will vary from year to year. About a third of them will vest at the end of your first year with the company, and the same is true for your second year. It takes four years for the entirety of your GSUs to vest.

Here’s what you can expect from Google’s stock vesting schedule:

Google front loads their vesting schedule which is almost the direct opposite of how Amazon structures their sign-on stock. However, Amazon’s offer comes with a 2-year cash bonus to smooth things out. All companies structure their sign on packages a little differently, but all are essentially targeting a similar compensation band for your achieved level.

Tax Liability with GSUs

As your GSUs vest, you will have to face the issue of tax liability. This is still taxed as income and can dramatically impact what you will owe to the government at the end of the year if you are not careful in planning ahead. 

You may need to adjust your tax withholding and sell some shares to cover the cost of your tax liability. Your HR or stock plan department can help you adjust your sell-to-cover election if the 22% default is not enough, so that you will not find yourself surprised with a massive tax bill at the end of the year. 

You also have the option to sell them your shares right away – as in, the same day that they vest (assuming your trading window is open). The price on the day that you receive them is the taxable value of the stock. Since they have not increased in value yet (or have only increased/decreased slightly from the vest price), minimal to no capital gains will be owed on these if you sell them. Of course, you will still pay income tax on the total value of the vest. 

Last but not least, if you are not already maxing out your 401(k), you may want to consider selling your GSUs and to make contributions to a tax-deductible account, like the Google 401(k). The best part of using this type of tax-sheltered account is that Google will match up to $3,000 in contributions or 50% of the contributions up to the IRS limit (whichever is higher). You can also make tax deductible contributions to an HSA to cover future medical expenses for you or your family.  

Get the Most From Your Stock Awards

Consilio Wealth Advisors specializes in financial planning for those who work at major tech companies like Google, so we understand perfectly what tech professionals like you need to make the most of your compensation package. When GSUs are a significant part of your compensation, it’s crucial to have a strategy and make the best use of what you are awarded. We can help you navigate these sometimes-tricky areas and help you get on the right path. 

If you need strategic advice on what to do with your GSUs as they vest over the next four years of your employment, schedule a call with Consilio Wealth Advisors today!

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