Vesting Schedules, Refreshers, and the Cliff: How Equity Pays Out

Vesting Schedules, Refreshers, and the Cliff: How Equity Actually Pays Out

Vesting is the rules that govern when granted equity actually becomes yours. The standard at FAANG and most tech companies is “4 years, 1-year cliff, monthly thereafter,” but the variations matter for total compensation and career timing decisions. Understanding cliffs, refreshes, accelerated vesting, and how to time job changes can shift compensation by tens to hundreds of thousands of dollars. This guide covers the standard schedules, the variations, and the practical implications for negotiation and career planning.

The Standard Vesting Schedule

For an initial RSU grant of $400k over 4 years at most FAANG companies:

1-year cliff: first 25% (= $100k) vests on your 1-year anniversary. Nothing vests before then.
Monthly thereafter: the remaining 75% vests over 36 months, ~2.08% per month (~$8.3k/month).

If you leave at month 11, you get nothing from this grant. If you leave at month 13, you get 25% (cliff vest) plus 2 months of post-cliff vesting (~4%) = ~29% of total grant. If you leave at month 47, you get ~98% of grant.

Variations Across Companies

Standard FAANG (Meta, Google, Amazon, NVIDIA)

4 years, 1-year cliff, monthly. Subject to refresh grants (see below).

Microsoft

4 years, 0-day cliff, monthly. (No initial cliff means you start earning equity immediately.) Counterintuitively this is often more candidate-friendly.

Amazon (specifically)

Different historically. The grant vests 5%/15%/40%/40% over 4 years (back-loaded). Sign-on bonus structured to compensate for the back-loading in years 1–2. As of 2024 most teams transitioned to more standard back-loading.

Stripe and similar

4 years, monthly from day 1, no cliff. Candidate-friendly for early departures but rare.

Apple

4 years, semi-annual vesting (every 6 months) rather than monthly. Quirky but real; affects timing of sales / tax events.

Most startups

Standard 4 years, 1-year cliff, monthly. Same structure as FAANG but on private equity (less liquid).

The Cliff: What It Means and Why It Matters

The 1-year cliff means leaving before your 1-year anniversary forfeits everything. This is intentional retention design — it costs money to recruit and onboard you, so the company wants commitment.

Practical implications:

Don’t quit before the cliff. Even if you’ve started looking by month 9, time the resignation past the 1-year mark to capture the 25% cliff vest. The dollars are usually worth more than 1–3 months of accelerated job change.
Negotiate cliff exceptions when relevant. If you have unvested equity at your previous company that you’d lose by joining now, ask for sign-on bonus to bridge.
Be aware of the “stay through May 14” trap. Some companies vest on quarterly dates; leaving the day before a vest forfeits that quarter.

Refreshes (Annual Equity Refresh)

Without refreshes, your initial grant vests over 4 years and your equity comp drops to zero. To prevent this, most FAANG companies grant additional equity annually (the “refresh”) starting in year 2.

Typical structure: refresh grants are 50–100% of initial grant per year. So if your initial grant was $400k over 4 years ($100k/year), you might get a $200k refresh in year 2 (also vesting over 4 years, so $50k/year in years 2–5). Stack the grants: in year 5, you’re vesting from years 1–5 grants simultaneously.

Refresh grants are usually performance-tied (top performers get bigger refreshes; lower performers get smaller or zero). Strong performers see total comp grow over time as refreshes compound; weak performers see comp drop after the initial grant fully vests.

When negotiating, ask about refresh policy explicitly: “What’s your typical refresh policy at this level? What was the typical refresh grant for someone at my level at last cycle?”

The “Front-Loaded” vs “Back-Loaded” Question

Some companies front-load (Microsoft: 0-day cliff, then monthly), some back-load (older Amazon: 5/15/40/40), most are flat.

For candidates: front-loading is candidate-friendly because you earn equity quickly. Back-loading is candidate-hostile because the bulk of your equity is in years 3–4, increasing switching costs.

Match your career timing decisions to the schedule. Don’t quit a back-loaded grant at the start of year 4; you’d forfeit 40% of the total grant.

Accelerated Vesting

“Acceleration” means equity vests faster than the standard schedule under specific conditions:

Acquisition / change-of-control acceleration

Some grants accelerate fully if the company is acquired. “Single-trigger” acceleration vests on the acquisition; “double-trigger” requires acquisition AND your termination within X months. Most modern grants are double-trigger.

Practical implication: if your company is acquired, your unvested equity may vest immediately (single-trigger) or only if you’re laid off post-acquisition (double-trigger). Check your grant agreement.

Death / disability acceleration

Most grants vest fully on death or permanent disability. Standard provision; rarely matters in practice.

Layoff acceleration

Rare. Most layoffs from FAANG don’t accelerate vesting; you take what you have and leave the rest. Some senior offers negotiate “X months of severance acceleration” — uncommon for IC roles but worth asking at staff+ levels.

Tax Implications of Vesting

RSUs are taxed at vest, not grant. When 100 shares vest at $50/share ($5k), you have $5k of ordinary income — taxed at your marginal rate. The company typically withholds ~22% federal (supplemental rate) and remits to the IRS. You owe additional tax if your marginal rate is higher than 22%.

After vest, shares behave like any stock: gains/losses are capital gains, with 1-year holding period for long-term treatment.

For high-comp engineers, vesting can push you into AMT territory or trigger underwithholding. Run a tax projection mid-year to avoid surprises.

Strategic Timing: When to Leave

Right after cliff (~13 months)

Captures the 25% cliff vest. Common pattern for engineers who realize the company isn’t a fit but want some equity.

Right before next vest event

For monthly vesters, time the resignation to immediately after the most recent monthly vest. For Apple’s semi-annual schedule, time after the May/Nov vest. The dollars are real.

After full initial grant vests (~4 years)

Captures the full initial grant. Subsequent comp depends on refreshes; if you’ve been getting healthy refreshes, comp continues. If not, year 4 is a natural exit point.

Senior+ “vest and rest” pattern

Some senior engineers stay 4–6 years for the full vest cycle plus refreshes, then transition. Compensation in years 4–6 is typically very high due to stacked grants; year 7+ compensation depends on continued strong performance reviews.

Common Mistakes

Quitting before the cliff. Almost always wrong unless the new opportunity has truly massive sign-on. Wait the extra weeks.
Forgetting refreshes when comparing offers. Year 1 comp at FAANG includes sign-on; year 2+ comp depends on refreshes. Compare steady-state, not just year 1.
Not asking about refresh policy. Recruiters won’t volunteer it; ask explicitly. Healthy refresh policy = comp stays high; weak refresh = comp drops post-vest.
Selling all RSU at vest without considering capital gains treatment. Holding for 1+ year after vest converts subsequent appreciation to long-term capital gains (lower tax rate). Trade-off vs concentration risk.
Forgetting AMT and quarterly estimated taxes. Big vests can underwithhold; you may owe additional tax in April or face underpayment penalties.
Ignoring trading window restrictions. Most public-company employees can only sell during open windows (post-earnings, no material info). 10b5-1 plans automate sales but require setup.

Frequently Asked Questions

What happens to my unvested RSUs if I leave?

You forfeit them. Vested RSUs are yours; unvested are gone. The company reclaims them. This is the entire point of vesting as a retention mechanism. There’s no cashing out unvested at exit unless your offer has explicit acceleration provisions.

How do I think about a back-loaded grant?

Discount it relative to a flat 25%/25%/25%/25% grant. The early years are worth less; the later years require sustained employment. If you’re risk-averse about your stay length, push for sign-on or higher base to offset the back-loading. Older Amazon offers had this issue; recruiters typically structured larger sign-ons to compensate.

Are equity refreshes really automatic?

Not automatic; performance-tied. Top performers get full or above-average refreshes; below-average performers get partial or zero refreshes. Don’t assume refresh income; deliver strong performance to maintain it. Some companies publish refresh ranges; ask explicitly during negotiation about typical and best-case refresh for your level.

Should I sell RSU at vest or hold?

Standard advice: sell at vest unless you have specific reason to hold. Holding concentrates risk in your employer’s stock; if both your job and your portfolio depend on the same company, a downturn is doubly painful. Some employees hold for capital gains treatment; weigh against concentration risk. Most financial planners recommend diversifying — sell vested RSUs and reinvest broadly.

How do startups handle vesting differently?

Most startups use the same 4-year monthly with 1-year cliff structure. Differences: equity is private (less liquid), grants may include early-exercise provisions to start the long-term capital gains clock earlier, accelerations are more common for executives. The biggest practical difference is liquidity, not vesting structure.