Equity Refresh Grant

An equity refresh grant is an additional award of stock options or restricted stock units given to an employee who already received an equity grant, usually at hire. Its main purpose is retention.

Carta's equity refresh guide describes refreshes as a way to keep top performers and offset the cost of recruiting replacements. They keep unvested value in front of employees as earlier grants vest.

How Does an Equity Refresh Grant Work?

The company issues a new grant on top of the original. The new grant has its own vesting schedule, so the employee has unvested equity for years after the first grant finishes.

Refreshes can be time-based, performance-based, or tied to a promotion. Time-based refreshes often arrive as the original grant nears the end of vesting.

The size depends on level, performance, and company policy. Many companies set guidelines by level to keep grants consistent.

Why Do Companies Issue Refresh Grants?

The main reason is retention. When the original grant is fully vested, an employee has less financial reason to stay and may be open to outside offers.

A refresh also rewards strong performance and growth in scope. It signals that the company values the employee's future contribution.

For HR, refresh programs also help with pay competitiveness. Without them, tenured employees can fall behind the equity offered to new hires.

What Types of Refresh Grants Exist?

Grants usually come as restricted stock units or options. The award type affects tax and cost, so choose the one that fits the company's stage.

How Does a Refresh Grant Differ From a New-Hire Grant?

A new-hire grant is part of the offer and sets the starting equity. A refresh grant comes later and rewards the employee for staying and performing.

The two follow separate vesting schedules. Layering them keeps the employee holding unvested equity at every point in their tenure.

Many companies keep refresh grants smaller than the initial grant, though policies vary.

How Should HR Design a Refresh Program?

• Set a clear policy for who is eligible and when grants are considered.
• Define grant guidelines by level and performance.
• Align the vesting period with the original grant so awards overlap.
• Model the effect on the equity pool and dilution.
• Explain the program to managers so they communicate it consistently.

Review the program each year. Market equity practices shift, and a stale policy leaves tenured employees underpaid.

What Mistakes Weaken Refresh Programs?

Granting refreshes without a plan is the most common issue. When grants are ad hoc, employees compare and feel treated unfairly, and managers lose credibility.

Waiting too long is another. If the refresh arrives after the original grant has fully vested, the employee may already be looking elsewhere.

• Ignoring the equity pool, which leads to dilution surprises.
• Giving the same refresh to everyone regardless of performance.
• Failing to explain how refresh decisions are made.

How Should Employees Evaluate a Refresh Grant?

Look at the number of units, the vesting schedule, and the grant price or share value. A larger count with a long vesting period may be worth less than a smaller grant that vests sooner.

Compare the refresh with the original grant and with what the company offers to new hires at your level. The comparison shows whether you are being kept competitive.

Ask what happens to unvested units if you leave or if the company is sold. Those terms decide how much of the award you can count on.

How Does HR Cloud Fit Into Refresh Grants?

HR Cloud does not administer equity grants. Its People page describes a single source of truth for job, pay, and performance data for employee records.

Use an equity management platform to track grants and vesting dates.

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Frequently Asked Questions

Q: What is an equity refresh grant?

A: It is an additional stock award given to an employee who already received an equity grant, mainly to keep them with the company.

Q: When are refresh grants given?

A: Often as the original grant nears the end of vesting, at a tenure milestone, or after a promotion or strong performance.

Q: Why do companies give equity refresh grants?

A: To retain employees, reward performance, and keep equity competitive with offers to new hires.

Q: How are refresh grants different from new-hire grants?

A: A new-hire grant is part of the offer. A refresh comes later and has its own vesting schedule.

Q: Are refresh grants guaranteed?

A: No. Companies set their own policy, and grants usually depend on performance and company decisions.

Q: What forms can a refresh grant take?

A: Most are restricted stock units or stock options, depending on the company's plan.