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Facebook strongly believes in rewarding employees by helping them invest in the company that they help become successful. Facebook does this by offering employees Facebook RSU benefits as well as 401K matching contributions. Their financial benefits help employees stay motivated and on track financially.
Facebook also offers its employees many other benefits including paid-time-off for the most important times in your life including having a baby and bereavement as well as other great perks while working in the office.
Let’s dive into what you need to know about your Facebook benefits.
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What is a Facebook RSU?
A benefit Facebook offers right away is the Facebook restricted stock unit (RSU). An RSU gives employees a share or payout of the company in some future date or subject to some performance condition.
In your offer letter, you’ll see it as a Facebook equity grant. This grant is denominated in dollars. Once you start, your grant is converted into RSUs based on the corresponding dollar amount.
You earn your RSUs throughout your time working at Facebook. Each RSU is worth a share of Facebook stock. The value of Facebook stock changes daily, but your RSU value is equal to the value of the stock on the day you become vested.
Facebook uses the following formula to convert your dollar amount offer into RSUs:
Grant dollar value/Average closing Facebook stock price for the month before your start date
If your calculation creates a fractional share, round it up to the nearest whole share to see the value of your Facebook RSUs.
For example, if you started September 1, 2020, you would look up the average Facebook stock price for August 1 - 31, 2020, which is $268.78. If your grant dollar value is $1,500, you’d receive:
$1,500/$268.78 = 6 shares (rounded up from 5.58)
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Facebook RSU Vesting Schedule
Facebook has a 4-year vesting schedule with three different ways to vest. Facebook has four vesting dates each year - February 15, May 15, August 15, and November 15. Your first vesting date is the first of these four dates that occurs after your start date.
Your vesting then depends if you are Vesting Schedule A, B, or C:
Schedule A - You earn 1/16th of your RSUs each quarter for four years
Schedule B - You earn 1/12th the first quarter, 1/16th the following two quarters and 2/48 the final quarter
Schedule C - You earn 5/48s of your RSUs the first quarter, 1/16th the following quarters, and 1/48th the final quarter
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Things you need to know about Facebook Restricted Stock Units
Don’t look at the current value of Facebook stock when determining the worth of the RSUs, but rather focus on how you can help the company grow so that your RSUs are worth more when you are vested as your RSUs are tied to the stock price.
You never have to pay anything to redeem your RSUs. As soon as you work 4 years, you become vested at the schedule indicated above and earn the value of one stock share (times the number of RSUs). Even if the stock price decreases, you still receive a valuable benefit.
You pay taxes on the vesting date. Facebook automatically withholds the appropriate amount of taxes when you become vested.
You may be eligible for an equity refresher grant during quarter 1 after your first year. An equity refresher grant is another opportunity to invest in the company in the form of RSUs on top of your initial equity grant. They are earned based on individual performance and/or Facebook’s need to reinvest employees in the company.
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Understanding Your Tax Impacts as a Facebook Employee
You are given the restricted stock at no cost, but once it is vested, it creates a taxable event in which you will need to pay ordinary income taxes on the gain between the fair market value (grant) and fair market value (vested).
Once you sell the stock, you will also need to pay capital gains taxes. While you’re free to sell your Facebook stock shares once you’re vested, you’ll incur further tax liabilities on any capital gains. If you sell the stock for more than the current value on your vested day, that’s when you incur a tax liability.
The amount of capital gains taxes will depend on how long you have held the shares. If they are held for less than a year, it will be considered short-term capital gains. If you hold the shares for a year or more, it is considered a long-term capital gain.
Facebook withholds the standard amount of taxes from each eligible employee’s paycheck. If you’re in a different (higher) tax bracket though, you may owe additional taxes at tax time. Talk with your tax advisor so that you are aware of the implications of becoming vested.
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Understanding Your Facebook 401k Match
Facebook offers a generous 50 percent match on employees’ contributions on up to 7 percent of an employee’s salary. Employees may contribute up to $19,500 in 2020, in both their traditional and Roth 401K, though. Your Facebook income includes standard pay, overtime pay, and any additional income including commissions or bonuses. Any Facebook RSU incentives offered are not included in your 401K match.
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Facebook Takes Care of Its Employees Financially
Facebook RSUs are a valuable benefit for Facebook employees. As long as you understand the tax implications of the investment and plan accordingly with your tax advisor, it can be a benefit greater than traditional stock options offer.