Preventing the Year 4 Cliff
Most initial equity grants vest over four years, typically with a one-year cliff (nothing vests until month 12, then 25% vests at once, then monthly or quarterly thereafter). This structure creates a predictable problem: by Year 4, your initial grant is fully vested. In Year 5, your equity income drops to zero unless the company has given you additional grants.
The Year 4 cliff in numbers:
| Year | Base Salary | Initial Grant (Annual) | Refresher Grant | Total Comp |
|---|---|---|---|---|
| 1 | $180k | $100k | $0 | $280k |
| 2 | $185k | $100k | $0 | $285k |
| 3 | $190k | $100k | $30k | $320k |
| 4 | $195k | $100k | $50k | $345k |
| 5 | $200k | $0 | $70k | $270k |
Without refreshers, Year 5 total compensation drops by $75k. With a growing refresher program, it stays flat or increases.
How refreshers work:
Companies issue new equity grants (refreshers) annually or biannually, typically starting in Year 2 or 3. These are separate from your initial grant and vest on their own 4-year schedule. Over time, you accumulate overlapping vesting schedules — this is the "golden handcuffs" effect. Leaving in Year 3 means forfeiting not just unvested initial shares but also unvested refresher shares.
Negotiating refreshers:
Most candidates never ask about refreshers during the offer stage. This is a mistake. Ask:
"What is the typical annual refresher range for someone at this level, and when does the first refresher typically occur?"
If the answer is "we don't have a formal refresher program," you now know your effective compensation will decline after Year 4 unless you renegotiate or leave. Factor this into your decision.
Performance review leverage:
Refreshers are typically tied to performance reviews. A strong Year 1 and Year 2 performance record is your best tool for negotiating a larger refresher — often more effective than negotiating at hire, because you now have internal leverage (demonstrated value) rather than just market leverage.