The senior engineer had been at the company for three years. She was one of the best performers on her team, consistently shipping critical features and mentoring junior developers. Her initial equity grant—200,000 shares at the Series B valuation—was almost fully vested. She did the math on what her compensation would look like in year four.
"My total comp is about to drop by $65K," she told me. "That's not a small adjustment. That's a complete repricing of what I'm worth to this company."
She had a point. Her initial equity grant had been structured the standard way: four-year vesting with a one-year cliff. She received 25% after year one, then monthly vesting for years two through four. Now, approaching year four, her equity vesting would drop to zero. Her base salary hadn't changed enough to compensate. Her cash bonus was modest.
Without a refresher grant, her total compensation was about to decline significantly at exactly the moment she was most valuable to the company. She had deep institutional knowledge, strong relationships across the organization, and the technical judgment that comes from years of experience with the codebase. Replacing her would cost far more than the equity refresh that could retain her.
"I've been talking to recruiters," she admitted. "I wasn't looking to leave, but they're calling with offers that blow my current comp out of the water. If my company isn't going to keep pace, maybe I should listen."
This story plays out constantly. Equity refreshers are the difference between a one-time signing bonus and a true long-term compensation program, yet most companies mismanage them. At SmithSpektrum, I've advised both companies designing refresh programs and engineers negotiating them. The patterns of success and failure are remarkably consistent[^1].
The Vesting Cliff Nobody Talks About
The standard four-year vesting schedule creates a hidden compensation cliff. Most engineers understand the one-year cliff at the start—you get nothing until you've been there a year, then 25% vests at once. What many don't think about until they get there is the cliff at the end: after year four, your equity vesting drops to zero.
Here's how it typically works. You join with an initial grant of, say, $200K in equity over four years. Year one, you vest $50K. Year two, another $50K. Years three and four, the same. Your total compensation during these years includes this equity as a significant component.
Then year five arrives. If the company hasn't given you additional grants, that equity component disappears entirely. Your compensation drops by $50K annually even though you're more valuable than when you started.
The cruel irony is that this cliff hits exactly when engineers are most valuable. By year five, they have deep knowledge of the systems, strong relationships with colleagues and stakeholders, and the judgment that only comes from experience. They're worth more to the company than they were as new hires. But their compensation structure says the opposite.
Companies that don't address this systematically lose their best tenured engineers to competitors who will. The retention cost of inadequate refreshers far exceeds the cost of the grants themselves.
How Refreshers Should Work
The purpose of a refresh program is to maintain equity compensation as initial grants vest out. Done properly, overlapping grants create steady compensation over time rather than a boom-and-bust cycle.
The mechanics are straightforward. Starting in year two or three, the company grants additional equity that vests over four years. This grant overlaps with the remaining vesting on the initial grant. In year four, as the initial grant completes vesting, the refresh grant continues. In year five, a new refresh grant layers on top. Eventually, multiple refresh grants vest simultaneously, creating stable equity compensation indefinitely.
| Company Type | Refresher Timing | Typical Amount | Grant Type |
|---|---|---|---|
| FAANG | Annually | 50-100% of original | RSU |
| Pre-IPO | At cliff/annually | 25-50% of original | ISO/NSO |
| Startup (Series A-B) | Retention-based | Variable | Options |
| Public tech (non-FAANG) | Every 2 years | 30-60% of original | RSU |
| Private equity backed | Rare | Performance-based | Phantom |
Consider an engineer with a $200K initial grant. In year two, they receive a $100K refresh grant. By year five, their initial grant has fully vested, but their year-two refresh still has two years of vesting remaining. If they received another $100K refresh in year four, those two grants together provide $75K of vesting in year five. The cliff is smoothed into a sustainable plateau.
The best refresh programs are formulaic rather than discretionary. Each year, employees receive refresh grants based on their level, performance rating, and tenure. The amounts are predictable enough that employees can plan for them, but differentiated enough that high performers feel rewarded.
The worst refresh programs are ad hoc, given only when employees threaten to leave. This creates a perverse incentive: the way to get a refresh is to update your LinkedIn and start interviewing. Loyal employees who don't play retention games get punished.
The Big Tech Approach
Large technology companies have sophisticated refresh programs, and understanding them helps benchmark what good looks like.
Google's approach is annual refreshes tied to performance ratings. A typical refresh ranges from 50% to 150% of the initial annual grant rate, depending on performance. A strong performer who received $400K initially might receive $50K to $150K in annual refreshes. These refreshes mean that after the initial grant vests, total compensation remains stable or even grows.
Meta follows a similar model, with annual performance-based refreshes ranging from 60% to 120% of target. Amazon is famously different—their initial grants are back-loaded, with only 5% vesting in year one and 15% in year two, followed by 40% in each of years three and four. After that, regular refreshes replace the back-loaded initial structure.
Microsoft and Apple also do annual performance-based refreshes, with amounts varying by level and rating. The common thread is predictability: engineers know they'll receive refreshes, they know approximately how much based on their level and performance, and they can plan accordingly.
These programs exist because big tech companies have learned that engineer retention is expensive. Recruiting, interviewing, onboarding, and ramp-up costs for a senior engineer easily exceed $200K. A generous refresh program is cheaper than constant recruiting.
The Startup Variation
Startups handle refreshes differently, and the differences matter when evaluating offers or designing programs.
Early-stage companies—seed through Series A—often have no formal refresh program. Equity grants are ad hoc, given for retention when someone threatens to leave or when a promotion creates an opportunity. This isn't ideal, but it's understandable: early-stage companies have limited equity budgets and uncertain futures.
Growth-stage companies—Series B through D—are beginning to systematize. They usually have refresh policies, but the policies may be informal or inconsistently applied. If you're joining a growth-stage company, ask specifically about their refresh approach. "We take care of our people" isn't an answer; a clear description of how refreshes are determined is.
Late-stage and pre-IPO companies typically have mature refresh programs that approach big tech sophistication. They've learned from seeing tenured employees leave for inadequate compensation, and they've professionalized their equity practices.
For engineers evaluating startup offers, the refresh policy matters as much as the initial grant. A generous initial grant with no refresh program means your compensation peaks in year three and then declines. A more modest initial grant with strong refresh policies might provide better total compensation over a five or ten-year tenure.
Designing a Refresh Program (For Companies)
If you're building or improving a refresh program, several design questions need answers.
Eligibility: Who receives refreshes? Most companies include all full-time employees at or above a certain tenure (typically one or two years), though some restrict eligibility by level. Making refreshes too exclusive creates resentment; making them too generous strains the equity budget.
Timing: When do refreshes start? Year two is most common, ensuring that employees receive grants before their initial equity begins running out. Starting later means employees experience the compensation dip before the refresh kicks in.
Amount determination: What drives refresh size? Performance rating is the most common factor, followed by level and tenure. Some companies use a purely formulaic approach (your refresh is X% of target based on your rating); others give managers discretion within ranges. Formulaic approaches are more predictable and feel fairer; discretionary approaches allow for nuance but create inconsistency.
Vesting schedule: How do refresh grants vest? Most match the initial grant schedule—four-year vesting with monthly increments after the first year. Some companies use faster schedules (three-year vesting) to increase near-term retention incentives. Avoid adding new cliffs to refresh grants; they create the same problem the refresh is meant to solve.
Communication: How do employees learn about refreshes? Transparency matters. Companies that hide the refresh program create anxiety; employees assume the worst and interview elsewhere. Companies that clearly communicate refresh policies—including expected amounts by level and rating—give employees confidence in their compensation trajectory.
For Engineers: Understanding Your Refresh
If you're evaluating a job offer or assessing your current compensation, understanding the refresh picture is essential.
Ask explicitly during interviews: "Can you describe your equity refresh program?" The quality of the answer tells you a lot. Clear, specific answers ("We do annual refreshes based on performance, ranging from $50K to $150K at your level") indicate a mature program. Vague answers ("We take care of our top performers") indicate either an immature program or an unwillingness to be transparent.
If you're already employed, your refresh should be part of your total compensation understanding. Know when your initial grant vests out and what your compensation looks like after. If refreshes aren't automatic, understand how to ask for them and what factors influence the decision.
Performance ratings matter more for refreshes than for most other compensation components. The difference between an "exceeds expectations" and a "meets expectations" rating might be 50% more refresh equity. If your company ties refreshes to ratings, managing your performance perception is financially significant.
Negotiating Refreshes
Refresh grants are negotiable, though less explicitly than initial offers. The leverage points are similar to any compensation negotiation: external offers, strong performance, and clear communication about retention risk.
The performance case: If you have consistently strong reviews, you can argue that your refresh should reflect your contribution. "Given my performance over the past two years, I'd like to discuss whether my refresh this cycle reflects the impact I've had." This is most effective when you have documented achievements and ratings that support your case.
The market case: If you have external interest—or actual offers—your refresh negotiation has more leverage. "I've received interest from other companies at significantly higher total compensation. I'd prefer to stay, but I need my refresh to bring my comp closer to market." This requires having done your research on what market compensation actually is.
The retention case: Simply communicating that you're thinking about your future can trigger refresh discussions. "I want to be here long-term, but I'm watching my equity vest out and wondering what my compensation trajectory looks like. Can we discuss?" Managers and HR understand this language; it signals retention risk without an explicit threat.
What's negotiable varies. Refresh grant size typically has some flexibility—managers often have authority to adjust grants within ranges, and exceptional cases can get approved above standard amounts. Timing is usually less flexible; most companies do refreshes on a set cycle and don't make off-cycle exceptions easily. Vesting schedule is almost never negotiable; it's set by company policy for consistency.
One mistake I see engineers make: accepting a below-market initial offer because the company promises strong refreshes. Promises aren't grants. You can't negotiate from a below-market position later; you're anchored. It's better to negotiate a strong initial offer and trust that refreshes will follow a reasonable program than to accept a weak initial offer on vague refresh promises.
Special Situations
Stock price changes complicate refresh calculations. If the stock price drops 50% after your initial grant, your equity is worth half what it was. Some companies grant additional shares to maintain dollar-value targets—if your target is $100K and the stock price halves, you get twice as many shares. Other companies maintain share targets, meaning your dollar value drops with the stock. Understanding which approach your company uses matters for modeling your compensation.
Pre-IPO refreshes carry different risks. The grant value is notional—based on the last funding round's valuation—but you can't sell until an IPO or acquisition. Future funding rounds dilute your percentage ownership. And the company might fail entirely, making all that equity worth zero. Pre-IPO refreshes are worth accepting, but don't count them at face value when comparing to cash compensation or public company equity.
Departure timing interacts with refresh grants. If you leave before refresh grants fully vest, the unvested portion is forfeited. If you have $100K of unvested refresh equity and you're considering leaving, that's $100K you're walking away from. It's not a reason to stay in a bad situation, but it's a real cost to factor into your decision.
The Retention Math
When I advise companies on refresh programs, I frame it in retention terms. Assume a senior engineer costs $250K to replace when you include recruiting, interviewing, onboarding, productivity ramp, and the projects that slip during the transition. That replacement cost is real whether you think about it or not.
A generous annual refresh—say $75K in equity—costs much less than replacement while maintaining compensation competitiveness. Even if only one in five engineers would have left without the refresh, the math favors generosity. You're spending $75K per engineer to avoid $50K of average replacement cost ($250K times 20% attrition), and getting the productivity and morale benefits of a stable team.
Companies that skimp on refreshes are penny wise and pound foolish. They save equity in the short term while hemorrhaging experienced engineers who cost far more to replace than to retain.
The senior engineer whose compensation was about to drop? She eventually had a direct conversation with her manager about refreshes. The company, it turned out, had been losing tenured engineers and hadn't connected it to their weak refresh program.
They implemented a formal refresh policy. Her year-four refresh was $120K over four years—not as much as she might have received as a new hire elsewhere, but enough to make her total compensation competitive with external offers.
She stayed. So did a dozen other engineers who'd been quietly updating their resumes. The refresh program cost less than the recruiting it would have taken to replace them.
References
[^1]: SmithSpektrum compensation advisory, refresh program analysis, 2020-2026. [^2]: Levels.fyi, "Equity Refresh Analysis," 2025. [^3]: Carta, "Equity Compensation Report," 2025. [^4]: Blind, "Compensation Discussion Data," 2024-2025.
Evaluating your equity refresh or designing a program? Contact SmithSpektrum for compensation analysis.
Author: Irvan Smith, Founder & Managing Director at SmithSpektrum