Layoffs are scary and with news of tech company layoffs coming from Microsoft, Spotify, Wayfair, Shopify, Twilio and others it's wise for employees exposed to tech industry layoffs to have a plan. For tech employees, company stock is often a significant part of your compensation and overall net worth. Understanding your equity compensation can even be an important part of how you negotiate your severance in a layoff. This article will share what you need to know to understand and create a plan for different types of equity compensation when you're laid off.
Tech employees facing employment changes need to understand the implications for their Stock Options. Unexercised options may be forfeited, while some companies may have provisions for extended exercise periods or accelerated vesting under certain circumstances. It's crucial to be aware of company policies and plan accordingly. It’s important to remember that if your employer does offer accelerated vesting or alternate exercise terms that employees must update their tax plans and consider their income and expenses in light of these changes (especially if a job loss or change is looming).
Broadly speaking there are 3 scenarios that tech employees will encounter if they are laid off with RSUs:
As always, your plan document will give you the most specific information on what happens to your Employee Stock Purchase Plan (ESPP) if you leave but generally there are two possibilities if you are laid off:
We refer to planning for an event like a layoff as Strategic Planning. This is because it requires considering your needs now as well as your long term goals. It also involves multiple areas of your financial life like income, expenses, investments, and taxes. As you make your plans, even when you're facing big changes, try to consider your bigger picture and always work with a trusted professional when needed.
As financial planners who specialize in working with equity compensation, we have seen how important it is to have a professional on your team to coordinate how you build and preserve wealth so you can lower your stress, pay less in taxes, and focus on reaching your goals. Schedule an Intro Call to get a better understanding of how your equity compensation fits into your plan to build wealth.
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