Equity refresh: designing the program that prevents the cliff
Without refresh, every employee hits a year-3 cliff where their new-hire grant runs out and the offer they could get elsewhere makes them leave.
- The 'unrefreshed' attrition cliff hits at year 3 of a 4-year vest. Plan for it.
- Refresh ties to performance + band position; not flat 'cost of staying'.
- Target unvested forward equity at all times (e.g. 1.5× annual grant equivalent vested per year forward).
- Communicate the program so high performers know it exists; don't make it a 'squeaky-wheel' benefit.
Stock-option cliffs were designed for an era of 4-year stints. In 2026 most engineers consider their next move at month 30. If you don't have a refresh program, you're not retaining — you're hoping.
Why refresh
- Year 4 vest is 100% complete. Year 3 already feels '75% done'.
- Competing offers come with full new 4-year grants; your retention case has 12 months of vest left.
- Refresh smooths the cliff: every year, the employee has ~3-4 years of unvested ahead of them.
- Without refresh, you'll lose your best people first — they have the most market options.
Designing the program
| Element | Recommended |
|---|---|
| Eligibility | All employees after 1 year |
| Cadence | Annual, aligned to comp cycle |
| Size | Differentiated by performance + band position; bigger for high performers low in band |
| Vest | 4 years, monthly, no cliff (stacks on existing grants) |
| Promo top-up | Separate refresh when promoted to new level |
The forward-vest math
- 1Step 1Compute per employee: unvested shares × current FMV.
- 2Step 2Target = 1.5× annual grant equivalent. If below target, refresh restores the buffer.
- 3Step 3Modulate by performance band: high performer = 100% target, solid = 70%, below = 0-30%.
- 4Step 4Roll up. Total refresh pool should be a planned line item, not a surprise to Finance.
Communicating it
If refresh exists but isn't documented, it becomes a benefit only for people who threaten to leave. That's the worst possible distribution — you reward flight-risk signalling. Publish the criteria, the cadence, and how decisions are made.
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