Employers offer a variety of compensation schemes to employees, rsu those involving stock. Among the compensation schemes involving stock is restricted stock, which generally comes in one of two forms, restricted stock awards and restricted stock units. Although almost identical, two key aspects differentiate restricted stock awards from restricted stock units. One of these differences, options relates to methods of taxing restricted stock, stems form options other, which relates to granting and vesting methods. Restricted stock constitutes shares granted to a company employee as a bonus. Unlike stock options, which employees must exercise in order to own and sell, restricted stock usually comes as a free award. Companies promise employees the delivery of restricted stock at a later date in order to promote long-term service with the company. For example, your stock may promise you a bonus of shares of restricted stock in five years time. Once you get your shares, you can do with them as you please. Restricted stock arrives in stock phases, granting and vesting. When a company grants restricted stock, it promises you the delivery of shares at a predetermined date. The stock vests when the rsu arrives and the shares pass into your possession. When you receive a restricted stock award, your company offers you shares at the time of the grant, although you cannot access those shares until vesting. The promised shares are called units, hence the term restricted stock units. The IRS allows for special tax provisions on some restricted stocks. If your company grants restricted stock that qualifies under IRS section 83 byou can elect to pay taxes on the stock upon granting or vesting. If the value of stock rises between granting and vesting, and you pay taxes upon granting, you can save substantial tax revenue. This tax privilege only applies to restricted stock stock. Because you receive no actual rsu with a restricted stock unit upon granting, you can only pay taxes on these shares upon vesting. Restricted stock units are similar to phantom stocks. Another employee compensation program, phantom stocks constitute stock promise to pay a bonus at a options date of equal value to a set number of company shares. Upon vesting, you receive either the cash value of the phantom shares or they convert into actual shares. When phantom shares convert into actual shares, they rsu from restricted stock units only in name. Does Dilution Occur When Shares Are Granted or Exercised? Tax Impacts of the Sale of a Non-Qualified Stock Option Stock Grants Vs. Stock Options Types of Stock Ownership. Restricted Stock Restricted stock constitutes shares granted to a company employee as a bonus. Granting and Vesting Restricted stock arrives in two phases, granting and vesting. Restricted Stock Units The IRS allows for special tax provisions on some restricted rsu. Restricted Stocks, Phantom Stocks and Stock Options Restricted stock units are similar to phantom stocks. References 4 Fidelity Investments: Restricted Stock FAQ National Center for Employee Ownership: Stock Options, Restricted Stock, Phantom Stock CNN Money; New Trend in Bonuses: Phantom Stocks; David Ellis; Fidelity Investments: Options Articles Stock Grants Vs. Stock Options Types of Stock Ownership Proceeds From the Exercise of Stock Options The Tax Implications of Selling Restricted Stock. More Articles What Happens When a Stock Split Is Issued to Stockholders? Tax Rate on Exercising Options Options Can Stocks Stock Copyright Leaf Group Ltd.