A restricted stock unit (RSU) is a form of compensation issued by an employer to an employee in the form of company shares. RSU’s are issued to an employee through a vesting plan and distribution schedule after achieving required performance milestones or upon remaining with their employer for a particular length of time. RSU’s give employees an incentive to stay with a company long term and increase profitability so that their shares increase in value. If an employee decides to hold their shares until they receive the full vested allocation, and the company’s stock rises, the employee receives the capital gain minus the value of the shares withheld for income taxes and the amount due in capital gains taxes. Restricted stock is included in gross income for tax purposes, and it is recognized on the date when the stocks become transferrable (also known as the vesting date).