Add the softened butter and powdered sugar to a large mixing bowl. Beat for 2–3 minutes, or until the mixture looks light, smooth, and creamy.

Add the vanilla extract and mix again until evenly blended into the butter mixture.

In a separate bowl, whisk the all-purpose flour and salt together until evenly combined.

Add the flour mixture gradually to the creamed butter, mixing on low speed just until a soft shortbread dough comes together. Avoid overmixing.

Gently fold the butterscotch baking chips into the dough with a spatula until they are evenly distributed.

Shape the dough into a log approximately 2 inches in diameter. Alternatively, form it into a flat disc if you plan to roll and cut the cookies.

Wrap the dough securely and refrigerate for 30 minutes, or until it feels firm enough to slice cleanly.

Preheat the oven to 350°F (175°C). Line two baking sheets with parchment paper.

Cut the chilled dough into approximately ¼-inch-thick rounds. If using the disc method, roll the dough to about ¼-inch thickness and cut it into your preferred shapes.

Place the cookies on the prepared baking sheets, leaving roughly 2 inches of space between them.

Sprinkle the tops lightly with coarse sugar if desired.

Bake for 12–15 minutes, watching carefully near the end. The edges should just begin to turn light golden while the centers remain pale.

Leave the cookies on the baking sheet for about 5 minutes so they can firm up.

Carefully transfer the cookies to a wire cooling rack and allow them to cool completely before serving or storing.