Editor’s note: A version of this question originally appeared on Reddit.
I’ve got to navigate a somewhat sticky work situation — Feb. 15 will mark my 1-year anniversary at my job, and my 1-year cliff for my stock options (if I leave before my 1-year cliff, I lose all my stock options).
The problem is, I’m planning to quit my job to go to medical school, which starts on Feb. 30. While technically I’m supposed to give my employer four weeks notice, I worry that they’ll just pay me out my salary when I put in my notice on Jan. 30, and I’ll miss out on my stock options. That would suck, because my stock is worth somewhere around $60,000.
My options seem to be:
- Give them a four-week notice on Jan. 30, and hope they don’t end my contract early
- Give them a two-week notice on Feb. 15
- Work until Feb. 30, tell them I want to transition to part-time, and then quit once I can’t juggle both work and school
None of these options seem ideal — what should I do?
What a sticky situation indeed! While I can’t suggest the best way to quit, I will encourage you to build a plan for your stock options immediately.
From your question, it wasn’t clear if you’re earning restricted stock units (RSUs), incentive stock options (ISOs), or non-qualified stock options (NSOs). Each is taxed differently, and carry varying exercise costs — RSUs are earned (you don’t pay for them out of pocket), while you purchase ISOs and NSOs. With all three types, you’ll also typically owe taxes upon exercise.
If you’re earning ISOs and NSOs, you’ll want to make a decision about whether you want to purchase (i.e. exercise) your stock options, and then build a plan for how to pay for them.
If you’re earning RSUs, the process is considerably more straightforward — when you reach your 1-year cliff, you’ll be given the shares in the company that you’ve earned and are entitled to.
One last caveat: Double- and triple-check your stock option paperwork to make sure you know exactly when your 1-year cliff is. Sometimes, people join a company but their stock grant doesn’t get processed immediately, and they find that their 1-year cliff is a week or two later than they expected.
In your notice, be explicit about your stock options, saying that you intend to exercise the stock options that vest on your 1-year cliff. That may make your company give you a direct response about whether you’ll be able to exercise your stock options — and give you an opening to negotiate from, if you don’t like the answer.
Build a plan now for your stock options, and best of luck in medical school!
- Vieje Piauwasdy, Senior Director of Equity Strategy, Secfi
Do you have a question about your stock options? Email us at firstname.lastname@example.org