Equity compensation is a form of non-cash pay that represents ownership in a company. It often comes in the form of stock options, restricted stock units (RSUs), or shares of stock. This type of compensation is commonly used by companies, especially startups, to attract and retain employees by aligning their interests with the company's performance. When employees receive equity compensation, they have the potential to benefit from the company's growth and success. If the company's value increases, the value of the equity can also rise, providing employees with financial rewards. However, the value can also decrease, making it a riskier form of compensation compared to traditional salary.