Introduction

Founded in March 2005 by David (Dave) Duffield and Aneel Bhusri, Workday set out to build cloud-delivered enterprise software–starting with solutions for human capital management and financial management. Workday launched its first product, Workday Human Capital Management, in 2006, offering organizations an alternative to traditional on-premises enterprise resource planning systems. Over time, the company expanded its product portfolio to include financial management, planning, analytics, payroll, and student information systems, serving customers across multiple industries.

In October 2012, Workday became a publicly traded company, reflecting its growth within the enterprise software market. Since then, the company has continued to operate as a provider of subscription-based enterprise applications, with headquarters in Pleasanton, California. Today, Workday supports workforce and financial operations for thousands of organizations globally and remains a significant participant in the cloud-based enterprise software sector.

As a Workday employee, you likely have access to one of the most comprehensive compensation and benefits packages in any industry. However, navigating the complexities of equity compensation, retirement planning, and tax optimization requires specialized knowledge and strategic planning.

At PCM Encore, we work with technology professionals across leading companies to help navigate equity compensation, coordinate financial planning, and develop tax-efficient investment strategies. This guide breaks down the key components of typical tech company benefits and provides actionable insights to help you make informed financial decisions.

Your Retirement Benefits

401(K) Plan Overview

Workday offers a competitive 401(k) plan. While plan features vary by employer, Workday's plan includes:

• Company match: Workday provides a 50% match on the first 6% of pay you contribute as pretax and/or Roth contributions
• Vesting schedules: Workday indicates you are always 100% vested in your own contributions and the company match
• Contribution limits: For 2026, employees can contribute up to $24,500 ($32,500 if age 50+, $35,750 if age 60-63)
• Investment options: Workday's lineup includes target-date options, index options, actively managed funds, and a self-directed brokerage option (BrokerageLink)
• Note: Workday's plan documents indicate that catch-up contributions are included when determining employer matching contributions, while after-tax contributions are not matched.

Maximizing Your Retirement Strategy

Contribution Hierarchy: Consider this approach to maximize your retirement savings:

• Contribute at least 6% of pay (each pay period) to receive the full Workday match — Workday matches 50% of the first 6% of pay contributed (pretax and/or Roth), with a year-end true-up process in some situations
• If you've already captured the match, consider Workday's after-tax 401(k) contributions for potential "Mega Backdoor Roth" — Workday allows after-tax contributions (not matched) and permits converting after-tax amounts to Roth (including automated conversions). Total employee + employer contributions can be up to $72,000 in 2026 (subject to IRS rules)
• Evaluate additional savings vehicles such as a taxable brokerage account and, if eligible, a Workday HSA — Workday offers an HSA if you enroll in an HSA-eligible medical plan (e.g., Cigna/Kaiser Smart Plan) and meet eligibility rules; Workday may also contribute to your HSA

The Mega Backdoor Roth Strategy

Workday's 401(k) plan allows after-tax contributions that can let you save beyond the $24,500 (2026) pretax/Roth elective deferral limit, up to the $72,000 total annual contributions cap for 2026 (including employer contributions). These after-tax dollars can be converted to Roth (including automated conversions), which may create tax-free growth opportunities (subject to applicable tax rules).

Key Consideration:

Not all plans offer this feature. Your retirement plan may be held at one custodian while your equity compensation is held elsewhere. A holistic financial plan coordinates across all your accounts, regardless of custodian.

Employee Stock Purchase Plan (ESPP)

How ESPPs Work

Many technology companies offer Employee Stock Purchase Plans, which allow employees to purchase company stock at a discount using payroll deductions (typically after-tax for U.S. employees). While plan features vary, common elements include:

Key Details:

• Discount: 15% — you pay 85% of the lower of the offering-date or purchase-date closing price (effective discount can exceed 15%)
• Annual purchase limit (qualified ESPPs): $25,000 per calendar year, measured using fair market value on the offering/grant date (Workday's plan enforces this limit and may suspend deductions to comply)
• Purchase frequency: Semi-annual — offering/purchase periods typically run June 1–Nov 30 and Dec 1–May 31 (shares purchased at period end)
• Look-back provisions: purchase price is 85% of the lower of the offering-date or purchase-date closing price

Important: Workday's ESPP is intended to be a "qualified" Section 423 plan for eligible participants, though the plan permits non-423 subplans for certain non-U.S. jurisdictions. Always review the plan documents and local subplan terms.

Tax Treatment of ESPP Sales

The tax treatment of your ESPP shares depends on how long you hold them. For qualified Section 423 plans:

Disqualifying Disposition (Selling before holding periods):

• If you sell before holding shares for 2 years from offering date AND 1 year from purchase date
• The spread at purchase (FMV at purchase/transfer date minus purchase price) is taxed as ordinary income
• Any additional gain is taxed as short-term or long-term capital gain (depending on holding period from purchase)

Qualifying Disposition (Meeting both holding periods):

• Hold for at least 2 years from offering date AND 1 year from purchase date
• The lesser of (a) actual gain or (b) the discount at grant is taxed as ordinary income
• Any remaining gain is taxed as long-term capital gain

Strategic Considerations

The Immediate Sale Strategy: Many financial advisors recommend selling ESPP shares immediately upon purchase to:

• Lock in the plan discount (Workday: purchase price is 85% of the lower of the start/end price), net of taxes and any price movement between purchase and sale
• Manage concentration risk in company stock
• Redeploy capital into a diversified portfolio

The Hold Strategy: Some employees hold ESPP shares to achieve qualifying disposition status, but this introduces:

• Market risk if stock declines
• Increased concentration in company stock
• Delayed liquidity

Our Perspective: The "right" strategy depends on your overall financial picture, tax situation, and existing equity holdings in your company. PCM Encore can help you evaluate this decision within your holistic wealth plan.

Equity Compensation: Restricted Stock Units (RSUs)

Understanding Your RSU Grant

RSUs are a common form of equity compensation used by Workday. Unlike stock options, RSUs don't require an exercise price; once they vest and settle into shares, their value generally tracks the stock price (which may rise or fall).

How RSUs Work:

• Granted at Workday's discretion (often at hire and/or through periodic compensation programs), subject to plan and award terms
• Vest on the schedule stated in your award Notice (vesting terms vary by grant and participant)
• Many RSU grants are time-based; Workday also grants performance-based RSUs to some participants under its equity plan
• Typically taxed as ordinary wage income when RSUs vest and settle into shares (timing depends on the award's settlement terms)

Tax Treatment at Vesting

When your RSUs vest:

• RSUs are taxed at vest/settlement; withholding may include federal (often supplemental), FICA, and state/local taxes
• You receive net shares after withholding (amount varies by rates/method)
• The taxable value is generally reported on your W-2 (U.S.)
• Your cost basis is typically the taxed value (often FMV at vest/settlement) used to calculate future capital gains/losses

Critical Tax Consideration: Federal withholding on RSU income is often treated as supplemental wages (commonly 22% flat; 37% above $1M annually) and may be insufficient if your marginal tax rate is higher. If your bracket is 32%, 35%, or 37%, withholding may not cover the full liability. We help calculate estimated tax payments to avoid surprises and underpayment penalties.

After Vesting: Sell or Hold?

Once your RSUs vest and shares hit your account, you face a key decision: sell immediately or hold?

Sell Immediately:

• Mitigates concentration risk
• Provides liquidity for diversification
• Treats equity comp as cash compensation
• Can reduce additional capital gain/loss exposure (though sales still require tax reporting)

Hold for Long-Term Capital Gains:

• Potential for additional growth if stock appreciates
• If held more than 1 year, any gain may qualify as long-term capital gain, generally taxed at 0%, 15%, or 20% depending on income
• Increases concentration risk in company stock

Trading Windows

At Workday, employees and other covered persons ('Insiders') are subject to trading restrictions, including restricted trading periods ('blackouts') and open window periods. Generally:

• Quarterly restricted trading periods typically end one full trading day after the company releases quarterly financial results (i.e., the open window generally begins after that)
• Shares can be delivered (e.g., from RSU vesting) during a restricted period, but discretionary sales typically must wait until an open window — unless executed under an approved Rule 10b5-1 trading plan or another permitted exception

Understanding these restrictions is important when planning sales (e.g., diversification, liquidity needs, or other portfolio moves), because trades must comply with Workday's open windows, special blackouts, and MNPI rules.

Advanced Topics for Technology Professionals

Rule 10b5-1 Trading Plans

What is a 10b5-1 Plan?

A Rule 10b5-1 trading plan is a pre-established written plan that allows company insiders to sell stock during blackout periods. While most technology employees are not "insiders" subject to Form 4 filings, 10b5-1 plans can benefit directors, officers, and other employees designated as Insiders under company policy.

Key Features:

• Must be established during an open trading window
• Requires a mandatory cooling-off period before the first trade (generally 90 days for directors and officers, and 30 days for other insiders)
• Sets predetermined prices, dates, or formulas for sales
• Provides an affirmative defense against insider trading allegations

Who Should Consider a 10b5-1 Plan?

• Form 4 filers (executives and board members)
• Designated Insiders with large, concentrated equity positions
• Those wanting systematic, disciplined diversification
• Approved Insiders with an active 10b5-1 plan

PCM Encore's Approach: We have the ability to work with Morgan Stanley's trading desk to draft and implement 10b5-1 plans for our clients. Even if your equity is held at another custodian, we can assist in setting up a 10b5-1 trading arrangement at another custodian and transfer proceeds back to your primary account.

Form 144: Restricted Stock Sales for Affiliates

What is Form 144?

Form 144 is an SEC notice of a proposed sale filed in connection with resales under SEC Rule 144. It is generally required for affiliates selling control securities (and for certain sales of restricted securities) when the sale exceeds SEC thresholds.

Who Must File Form 144?

At most technology companies, this typically includes:

• All board members
• C-suite executives (CEO, CFO, General Counsel, etc.)
• Other executives designated as reporting persons
• Large shareholders who are considered 'affiliates' because they have control or influence over the issuer (often including 10% holders, depending on facts and circumstances)

Regular employees are generally not considered affiliates and don't file Form 144, regardless of how much stock they sell.

Filing Thresholds for Affiliates: If you are an affiliate, you must file Form 144 when the sale involves more than 5,000 shares OR the aggregate dollar amount is greater than $50,000 in any three-month period.

Key Requirements:

• Must be transmitted for filing concurrently with placing the sell order with a broker (or execution with a market maker)
• For affiliates, sales are subject to volume limits (generally the greater of 1% of outstanding shares or average weekly trading volume, as applicable)
• Creates a public record of the proposed sale via the SEC's EDGAR system

Why This Matters: If you're subject to Form 144 requirements, your stock sales become public information. Strategic planning around timing, volume, and public perception becomes critical. We help you navigate these considerations with discretion and compliance.

Why Work with PCM Encore

We Understand Tech Company Benefits

We work with employees from various technology companies and understand the nuances of equity compensation packages. We're familiar with:

• How trading windows affect your liquidity planning
• The interplay between Equity Incentive Plan, RSUs, and retirement contributions
• Tax considerations across different jurisdictions
• The complexity of coordinating multiple custodial relationships

Holistic Wealth Management

Your compensation is just one component of your financial life. We help you with:

• Tax Planning: Strategic RSU sales, tax-loss harvesting, and retirement account optimization
• Estate planning: Ensure your wealth transfers efficiently to heirs
• Risk management: Appropriate insurance coverage for your income level
• Education planning: 529 plans and other strategies for children's education
• Real estate: Purchase planning and mortgage strategies
• Charitable giving: Tax-efficient strategies including donor-advised funds

Experience with Technology Professionals

We work with employees from various technology companies including public and pre-IPO organizations. This experience provides insights into:

• Industry compensation trends and structures
• How different companies structure equity benefits
• Strategies that work for tech professionals at various career stages
• Pre-IPO and liquidity event planning

Common Questions from Technology Professionals

I have $10-15 million in company stock. How do I diversify without triggering huge taxes?

This is one of the most common situations we encounter. Strategic diversification often involves:

• Systematic selling programs spread over multiple years
• Tax-loss harvesting in other accounts to offset gains
• Charitable giving strategies using appreciated stock
• Exchange funds: Pooling your concentrated position with other investors's concentrated positions to achieve diversification while deferring capital gains
• Using Qualified Opportunity Zone investments to defer capital gains, while considering direct indexing strategies to manage tax implications effectively
• Timing sales relative to other income events
• Potentially using options strategies (covered calls, collars) to reduce volatility

Should I max out my 401(k) or pay down my mortgage?

The answer depends on:

• Your mortgage interest rate vs. expected investment returns
• Your tax bracket and the value of 401(k) deductions
• Your employer match (we recommend that you always capture this first)
• Your overall debt-to-asset ratio
• Your psychological comfort with debt

When should I start selling my RSUs after they vest?

There's no one-size-fits-all answer. We typically recommend:

• Evaluating your total company holdings relative to net worth
• Establishing target allocation percentages
• Creating a systematic rebalancing program
• Considering tax implications of your overall financial picture
• Factoring in your career stage and income stability

I'm considering early retirement. Am I ready?

Key factors to evaluate:

• Do you have sufficient liquid assets to cover 10+ years of expenses?
• How will you bridge healthcare until Medicare at 65?
• What happens to your unvested equity? Does your company have special retirement provisions?
• Have you modeled various market scenarios?
• Will you pursue consulting or other income?

Getting Started with PCM Encore

Maximizing the value of your compensation and benefits requires specialized expertise and proactive planning. At PCM Encore, we aim to serve as your partner in navigating these complexities.

Our Process:

• Initial Consultation: We learn about your financial situation, goals, and concerns
• Comprehensive Analysis: We review your equity compensation, existing holdings, and overall financial picture
• Strategy Development: We create a customized plan addressing equity compensation, taxes, retirement, and wealth building
• Implementation: We help execute your plan, coordinating with your existing custodians
• Ongoing Management: We meet regularly to adjust your plan as your life and company evolve

We work with:

• Recent hires navigating their first equity grants
• Mid-career professionals accumulating substantial equity positions
• Senior employees planning for retirement or early retirement
• Individuals managing concentrated stock positions

Next Steps:

If you're ready to have a conversation about your equity compensation and financial future, we'd welcome the opportunity to speak with you.

Important Disclosures

This guide is for educational purposes only and does not constitute investment advice, tax advice, or legal advice. Company benefit programs are subject to change, and you should consult your official plan documents for the most current information. Tax laws are complex and subject to change; consult with a qualified tax advisor regarding your specific situation.

PCM Encore maintains custody relationships with multiple custodians and can work with clients regardless of where their equity compensation is held.

PCM Encore is not affiliated with, endorsed by, or sponsored by any specific technology company. This guide has been prepared independently to serve technology professionals across the industry.

Securities and advisory services offered through qualified registered representatives of PCM Encore. Past performance does not guarantee future results.

Last updated: May 2026