# Equity refresh Author: Josh Steinfeld | Read time: 7 minutes Published date: 4 April 2024 An equity refresh grant is a stock grant issued to tenured employees. Equity refreshes help retain top performers and offset the costs of recruiting. ## Contents - [Equity refresh](#equity-refresh) - [What is an equity refresh grant?](#what-is-an-equity-refresh-grant) - [1. Time-based, retention, or tenure grants](#1-time-based-retention-or-tenure-grants) - [2. Promotion grants](#2-promotion-grants) - [3. Performance grants](#3-performance-grants) - [What is the typical size of an equity refresh grant?](#what-is-the-typical-size-of-an-equity-refresh-grant) - [When are companies issuing refresh grants?](#when-are-companies-issuing-refresh-grants) - [Best practices for equity refresh grants](#best-practices-for-equity-refresh-grants) - [Plan proactively](#plan-proactively) - [Use relevant, accurate compensation data](#use-relevant-accurate-compensation-data) - [Communicate with employees](#communicate-with-employees) - [How Carta Total Compensation can help](#how-carta-total-compensation-can-help) - [Download Carta's Equity Refresh Calculator](#download-carta-s-equity-refresh-calculator) ## What is an equity refresh grant? Since [equity](https://fund-forecasting@carta.com/sg/en/learn/equity/) is such a powerful tool for employee retention, it makes sense to grant equity throughout an employee’s time with your company, not just when they’re hired. An equity refresh is a [stock grant](https://fund-forecasting@carta.com/sg/en/learn/equity/stock-options/stock-grant/) issued to employees who have already received a new-hire grant (equity that’s granted to an employee when they first join a company). While refresh grants are always aimed at employee retention, there are three main types of refresh grants. ### 1. Time-based, retention, or tenure grants These grants are given to employees when they reach a set tenure milestone or are completing [vesting](https://fund-forecasting@carta.com/sg/en/learn/equity/stock-options/vesting/) of their new-hire grant. These are aimed at retaining employees beyond the cliff of their new hire grant and are generally issued when the initial grant has vested at least halfway. **Traditional annual refresh grant** Some startups treat equity refreshes like yearly salary raises and give a standard increase to all employees to stay competitive against the market. These grants start vesting immediately and vest over either one or four years on top of any other grants. **Boxcar grant** You grant equity to an employee at year two or three, but the new grant only starts vesting once the new hire grant is fully vested (after year four). These grants vest over one year vs. a traditional grant that vests over four years. ### 2. Promotion grants These are granted at the time of a promotion to reflect the new role or level’s compensation. To determine the amount to issue for these grants, you’ll need real-time, [accurate compensation data](https://fund-forecasting@carta.com/sg/en/equity-management/compensation/) for what a new hire in that role would receive. ### 3. Performance grants These are granted to reward top performers or when employees hit certain predetermined metrics. The vesting schedule may vary (vesting over one or four years), but they generally start vesting immediately to reward employees. ## What is the typical size of an equity refresh grant? Generally, our data shows that refresh grants are about 30% of what a new hire would be granted if that person were hired today for that same role or level. ## When are companies issuing refresh grants? According to Carta data, between 2022-2024, about 20% of employees received a refresh grant at year one. By year two, nearly 50% of employees received at least one additional grant beyond their new hire grant. ### Best practices for equity refresh grants The main goal of a refresh grant is to retain top talent and reward employees’ contributions, ensuring continued alignment between their interests and the long-term growth and success of your company. ### Plan proactively When it comes to implementing an equity refresh program, proactive [compensation planning](https://fund-forecasting@carta.com/sg/en/learn/startups/compensation/compensation-plans/) is essential. Key elements of proactive planning include: - **Forecasting:** Regularly assess the impact of refresh grants on your equity pool and potential dilution. - **Board involvement:** Keep [your board](https://fund-forecasting@carta.com/sg/en/learn/startups/private-companies/board-of-directors/) informed and involved. - **Adapting to changes:** Be ready to adjust your plans based on company growth, returns to your equity plan pool, market conditions, and employee feedback. ### Use relevant, accurate compensation data To understand how much equity you should be granting, it’s important to have up-to-date and accurate [equity compensation data](https://fund-forecasting@carta.com/sg/en/equity-management/compensation/) to ensure your refresh grants are fair and competitive. ### Communicate with employees Making sure employees understand the [value of their equity](https://fund-forecasting@carta.com/sg/en/learn/equity/startup-equity-calculator/) is crucial for a refresh program’s success. Companies that effectively communicate the value of their equity tend to have higher retention rates. ## How Carta Total Compensation can help [Carta Total Compensation](https://fund-forecasting@carta.com/sg/en/equity-management/compensation/) will proactively flag when employees are completing vesting of their new hire grant soon, ensuring accurate forecasting of equity pool allocations and dilution. ## Download Carta's Equity Refresh Calculator Calculate the number of shares to grant employees eligible for "refresh" or "tenure" grants with Carta’s Equity Refresh Calculator.