TikTok owner ByteDance adjusts share option policy in favour of staff in tax, cash-in arrangements

ByteDance, the owner of popular short video app TikTok, is adjusting its policy on share options so that employees can use less cash to pay taxes and are able to resell their shares faster.

The company recently informed its US-based employees that they can withhold up to 37 per cent of the vested restricted stock units (RSUs) for tax payments, up from the previous 22 per cent, according to two people briefed on the change.

Many technology firms grant staff RSUs as a performance reward or an incentive to stay with the company, which will be vested over the years, thus eligible to be sold. In normal cases, the employer will withhold a portion of the vested units for federal, state and local taxes. However, an employee may pay taxes out of their own pocket if the withheld portion is lower than their tax bracket.

In addition, US-based employees of ByteDance have been told that they can sell 60 per cent of the vested RSUs back to the company after the first year, up from 50 per cent, and the rest will become transactable in equal tranches in the following five years.

The change for US staff will be effective later this year. It is not clear how and when the adjustments will apply to ByteDance employees in other parts of the world.

ByteDance did not immediately respond to a request for comment.

The company, whose plans for an initial public offering remain in limbo, has conducted regular share buy-back programmes for employees and institutional investors to cash out since 2017. The most recent buy-back for staff, available from March, priced the shares at US$170.81 each, up nearly 7 per cent from the previous round late last year.

In January this year, ByteDance also issued a new payroll policy to allow employees to sell their vested RSUs faster. Under the new rule, workers would receive 20 per cent of their total stock awards after their first year of service, up from 15 per cent previously, and their stock grants would be vested on a quarterly basis rather than annually.

The latest changes come at a time when ByteDance’s flagship app TikTok faces uncertainty in the US. In April, US President Joe Biden signed a law that required ByteDance to divest TikTok in 270 days, or it would face an app store ban in the US.

ByteDance, together with TikTok and some content creators, have filed legal challenges against the new legislation, which are set for oral arguments on September 16.