RSUs as employee remuneration option
Abroad, RSUs (restricted stock units) are a relatively common and effective tool for rewarding employees. They are becoming increasingly popular in the Czech Republic where, in a highly competitive labour market, retaining the best employees is a challenge for all companies.
An RSU is a non-transferable, contingent equity right that entitles employees to receive a certain number of shares in the company, usually upon the achievement of set targets (KPIs) or after the elapse of a specified period of time. The setup of these plans varies widely in practice, but by default, unlike traditional stock plans, RSU schemes do not require employees to purchase shares. RSUs are granted to employees free of charge, which is an attractive incentive for employees in particular. Also, in the period before they acquire the shares, employees are usually granted the right to receive dividends equivalent to already owning the promised shares.
The vesting period for RSU plans is usually several years, which encourages employees to stay with the company to achieve the full benefit. RSUs can be linked to KPIs, ensuring that employees are rewarded for their contribution to the company's growth.
When implementing RSUs, it is essential to take the following basic steps:
- develop a plan - a framework document describing the rules of the scheme
- conclude award agreements with employees, which set out the terms and conditions, and the manner how the promise of shares is to be exercised.
In the Czech Republic, we more often come across a situation where RSU plans are implemented by foreign companies for the employees (or board members) of their Czech subsidiaries. In such cases, the RSU plans and the rights and obligations arising from the securities granted are governed by foreign law. Nevertheless, it is necessary to observe the rules set by Czech law, such as the requirement for the equal remuneration of employees or the board members’ remuneration being subject to approval.
In the less common situation where a RSU or similar plan is being implemented by a Czech company, it is also necessary to consider amending the company's articles of association or statutes (should they contain restrictions for the issuance of such shares or interests), to regulate the rights and obligations of shareholders as regards transferring the shares (interests) to another person, and, possibly to enter into an agreement with the new shareholders on exercising their rights arising from the shares granted.
RSUs go beyond the common cash bonus or salary increase, as they give employees a tangible sense of ownership in the company. This aligns the interests of employees with those of the shareholders, fostering a stronger employee commitment to the organisation’s long-term growth. When employees perceive themselves as co-owners, they are more likely to take responsibility for their work, make strategic decisions, and contribute to the overall success of the company.