Refresher Grants: A Founder’s Guide to Equity Retention

Refresher grants are equity awards granted to employees after their initial new-hire grant. In theory, they are straightforward tools to keep high-value employees engaged, reward strong performance, and maintain competitive total compensation as the company grows.

In practice, however, refresher programs can become difficult to manage over the long term. Companies may introduce them too early, apply them too broadly, or attempt to solve multiple problems with a single grant type. The result is predictable: dilution increases, the compensation philosophy becomes less clear, and employees may receive signals the company did not intend to send.

Refresher grants should be used to retain and motivate employees while minimizing unnecessary dilution. Two common challenges are internal fairness concerns about who receives what and why, and option-pool dilution, as broad-based refresher programs can become costly over time.

Three Types of Refresher Grants and When to Use Them

Most companies implement one or more of three distinct refresher types. Each serves a different strategic purpose and should be considered based on company stage and maturity.

Promotion Refresher Grants: The Baseline for Equity Compensation

Promotion grants recognize increased responsibility and align equity compensation with the market for the new role. They are often the first refresher type companies implement because the trigger is clear and defensible. Companies can implement them as early as Series A or Series B or once they have a defined leveling framework.

Promotion grants are generally awarded on the promotion date. Sizing is commonly framed as the difference between what a new hire would receive at the new level and what the employee would have received at the prior level, calculated at the current valuation. Exceptions may exist for high-performing employees, but the core logic remains: the grant aligns with role scope, not subjective reward.

Vesting is commonly over three to four years, with monthly vesting and often no cliff. Promotion refreshers are relatively easy to administer, integrate naturally with leveling, and become a predictable part of career progression once the organization can run levels consistently.

Performance Refresher Grants: Reward Top Performers

Performance grants reward top performers and concentrate equity ownership among those creating outsized value. They are powerful when done well and more difficult to manage when introduced too early.

These grants typically go to a narrow group of top performers, often 5% to 20% of the organization, and are awarded annually after performance reviews. The sizing is often expressed as a percentage of what a new-hire grant would be at that level, adjusted by performance rating. The tighter the definition of “top performer,” the more meaningful the awards can be without making dilution unmanageable. Most companies use a three- to four-year vesting schedule with monthly vesting. They typically choose either layered vesting, which starts immediately, or boxcar vesting, which starts later and smooths dilution and equity burn rates.  

A key prerequisite is the ability to identify top performance credibly. If performance management is not calibrated and understood across the organization, performance refresh becomes political. Managers will stretch definitions, “top performer” will quietly expand, and the program will turn into a broad refresh that undermines differentiation.

That is why performance grants typically come at Series B through Series C, or once the company has enough scale for calibration and enough competitive pressure that retaining the best people is a clear priority.

Tenure Refresher Grants: Reduce End-of-Vesting Retention Risk

Tenure grants address the fully vested problem, when employees nearing the end of their initial vesting feel their equity deal is complete. Even happy employees can become more receptive to outside offers when their ongoing equity is about to run out.

Tenure grants are typically awarded after two to three years, often when a meaningful portion of the initial grant has vested. Sizing is usually discounted compared with a new-hire grant at the same level because the employee already has equity inertia and because the award arrives later in the tenure curve.

Over time, tenure grants can be the most expensive refresher type because they may apply to a broad group of solid performers, not only a narrow high-performer slice. That is why it often makes sense later, such as Series C and beyond, or when enough employees reach the end of vesting each year that the issue becomes systematic rather than ad hoc.

How Refresher Grants Work Together and Why Rules Matter

Employees can qualify for multiple refreshers in the same year, such as a promotion plus a top performance rating. Granting both can make sense because they reward different outcomes: a level change versus exceptional impact. Without clear rules, stacked awards can create inconsistent outcomes and heavier vesting than intended. Set clear eligibility gates and a cap on total annual refresh so outcomes stay consistent and dilution stays controlled.

The interaction between performance grants and tenure or promotion refresh matters as well. If promotion and tenure refresh exist, strong employees are already covered from a retention perspective. That allows performance refresh to remain narrow, often limited to fewer than 10% of employees, preserving its meaning.

If performance refresh is the only ongoing mechanism beyond new-hire grants, the program often gets stretched to cover both good employees the company wants to retain and high-impact talent. That tension tends to water down selection criteria and expand the definition of top performer. In many cases, introducing promotion and tenure refresh protects performance refresh by reducing pressure to use one tool to solve every retention problem.

Layered vs. Boxcar Vesting for Refresher Grants

Refresher grants do not exist in isolation. How they vest on top of existing awards shapes both employee motivation and the company’s dilution curve.

Layered vesting means each new grant starts vesting immediately over a standard multiyear schedule. It is common because it feels generous, is straightforward to communicate, and lets employees see value right away. The trade-off is that overlapping grants create heavier vesting in years when multiple awards run simultaneously, which can be more dilutive earlier and can have a more dramatic fall-off later.

Boxcar vesting delays vesting until the initial grant, or a prior grant, is complete. It creates a cleaner vesting curve and can be more dilution-friendly, but it is harder to explain and can feel less motivating because the reward is delayed. This approach tends to show up more in later-stage companies that are more sensitive to dilution profiles and financial predictability.

Performance-based vesting adds another layer. 

• Some companies tie vesting to an annual business plan approved by the board, which creates a natural one-year retention cadence but can be hard to define precisely. 
• Others use metric-based vesting without a time constraint, which can align with long-term goals but may trigger rapid vesting if milestones are achieved quickly. 
• A third approach is individual performance assessment at the board level, which is flexible but can become subjective and contentious if used as the primary mechanism.

Even within performance vesting, timing choices matter. 

• Immediate full vesting at achievement can create a dilution spike. 
• Triggering the start of a vesting schedule upon achievement balances reward with continued retention.

The core idea of this section is that vesting is part of the strategy, not an afterthought. A refresher program cannot be effective if the vesting design undermines either motivation or financial control.

Common Refresher Grant Mistakes to Avoid

A common mistake is using refreshers to fix a weak initial grant framework. If initial grants are inconsistent or off-market, employees will feel undercompensated early, and managers will push for refreshers as a remedy. A more scalable approach is to treat refreshers as a second layer that you add only once the basics are right. Most companies do best when they start with promotion grants, add performance grants once performance management is calibrated, and introduce tenure grants only when end-of-vesting retention risk becomes systematic rather than occasional.

Another mistake is launching performance grants without a robust performance system. Without an objective, calibrated process, managers cannot identify top performers credibly, and favoritism and bias can dominate decisions. That can create internal conflict and resentment.

A separate mistake is operating without a clear philosophy. Employees will infer one from who receives refreshers, when they receive them, and how meaningful they are. A clear philosophy is this: Refresher grants should concentrate equity among top performers and employees the company genuinely wants to retain. That means using the right type of refresher for the right reason, rather than spreading equity broadly because it is politically easy.

This is also where dilution becomes a real strategic constraint. Dilution is expensive, and refresher programs compound over time. If refreshers are treated as routine entitlements, they will steadily consume the option pool and force painful trade-offs later.

Conclusion: Build a Refresher Grant Program That Balances Retention and Dilution

For companies building systematic equity programs, understanding when, how, and why to implement different types of refreshers is critical for talent attraction, retention, and dilution management.

A practical framework is to get initial grants right first, implement promotion refresh as a baseline, add performance refresh only when performance management is mature enough to keep it narrow and credible, and introduce tenure refresh only when end-of-vesting retention risk becomes a recurring, systematic need. Throughout, the strongest programs focus equity on the people who drive the most value and treat dilution as a real trade-off.

With these principles in place, refreshers stop being an administrative patch and become a deliberate extension of the company’s equity philosophy.

For more resources for private companies, check out the Private Company Stock Plans section on NASPP.com