पाठशाला Pathshala · दल Dal, The team · Lesson 28 · Scale

Equity refreshers and compensation at scale

At four years every early grant has vested and the people a company most needs have nothing left to stay for. How to design refresh grants, promotion top-ups and retention awards for a hundred-person team.

Pathshala, The Founder Library · 11 October 2026 · 7 min read

The cut face of a tree stump showing its annual growth rings. — Photograph: Sıla Onorevole · Pexels

The first grants a startup makes are designed to bring people in. Four years later they have done their work and fully vested, and the people who joined early, who know the most and are hardest to replace, now hold nothing that pays them to stay. Refresh grants are how a company keeps paying in equity for work that is still being done.

This lesson covers the four kinds of grant after the first, how to size a refresh, how equity moves with promotion bands, when a retention award is worth it, how to budget the pool for a team of a hundred, and the annual review that puts it together. The [ESOP design lesson](/library/esop-design-pool-grants-strike-price) covers the first grant and the pool.

The four-year cliff nobody planned

A grant vesting over four years gives an employee a reason to stay that shrinks every month. In year one the unvested amount is the whole grant; by year three it is a quarter; at year four it is nothing. A competitor’s offer at year three or four only has to beat salary and a small remainder, and it usually includes a new-hire grant of its own. The people for whom this matters most are the early ones whose grants were large, whose judgement the company now depends on, and whose departure is the one that hurts.

Most companies with venture funding now refresh. Peter Walker of Carta reported in April 2024 that 47 per cent of employees in a Carta analysis had a second grant within two years of joining and 70 per cent had received some refresh by the time their four-year grant fully vested. The question is not whether to refresh but how, so that the grants are predictable, fair and affordable.

Four kinds of grant after the first

Keep the kinds separate, because each answers a different question. A tenure refresh keeps equity unvested for everyone performing at their level: it is a rule, applied to all. A promotion grant moves a person’s equity to their new level. A performance grant rewards the strongest, decided in the review cycle. A retention award keeps a specific, named person through a specific period. Mixing them produces grants nobody can explain: a refresh that was really a promotion, or a retention award given to whoever asked loudest.

Carta’s guide to refreshes describes two shapes for the tenure refresh. A traditional annual refresh is granted each year and starts vesting at once over one or four years. A boxcar refresh is granted in year two or three and begins vesting only when the new-hire grant has finished, so the employee always has a grant vesting. Its data for 2022 to 2024 shows about 20 per cent of employees receiving a refresh at year one and nearly half by year two, with refreshes averaging about 30 per cent of a new-hire grant for the same role and level.

Sizing the refresh

Indian law shapes the design. Rule 12 of the share capital rules requires at least a year between the grant of an option and its vesting, so every refresh has its own one-year wait. A refresh granted at the moment the first grant finishes leaves a year with nothing vesting; a refresh granted at year two or three is vesting by the time the first grant ends. Grant early, and grant on a calendar, not when someone resigns.

A black-and-white close-up of sand running through an hourglass. — Every grant has a year’s wait before anything vests. Grant the refresh before the first grant’s sand runs out. Photograph: Muhammed Zahid Bulut · Pexels

A worked case. A senior engineer joined with a grant worth ₹20 lakh at today’s price. With no refresh she has nothing unvested at year four. With a refresh of thirty per cent of a new-hire grant every year from year two, she has about ₹13.5 lakh unvested at year four, roughly two-thirds of what a new hire at her level would receive, and each year adds a new grant as an old one finishes. Set your own grant, refresh size and cadence below.

Read the third tile as a walk-away test. If a strong person’s unvested equity at year four is well below what a new hire at their level gets, the market is paying them to leave and join a company like yours. Two-thirds to a whole new-hire grant is a reasonable target for people you want to keep; less is fine for people you would replace without regret, which is why refreshes should depend on performance at level, not just tenure.

Promotion bands and the equity that moves with them

Promotion is where most equity unfairness at scale comes from. Someone hired at level three in 2023 and promoted to level four in 2026 often holds less than a level-four hire made last month, because their grant was sized for a lower level at a lower price. Index Ventures’ Rewarding Talent handbook recommends topping a promoted person’s options up to match what a new hire in the same role would receive, counting what is still unvested; Carta suggests a promotion grant equal to the difference between the midpoints of the old and new levels. Either rule works if it is written down and applied to everyone.

This needs levels and bands that include equity, which the [compensation bands lesson](/library/compensation-bands-for-startup) builds. A band table with a grant value per level makes promotion grants arithmetic rather than negotiation: new level’s grant, minus unvested from earlier grants valued the same way, granted at the review.

Retention awards for the few

A retention award is a grant to a named person because losing them in the next two years would cost the company something specific: a platform only they understand, a set of customer relationships, a team that would follow them out. Index Ventures quotes Farfetch keeping a pot for top-ups specifically for high contributors after the two-year vesting mark. Keep the list short, a handful of people in a hundred, reviewed by the board’s compensation discussion, and vesting over two to three years so it covers the period it is for.

One Indian detail matters at this size. Rule 12 requires a separate shareholder resolution for grants to an identified employee of one per cent or more of the issued capital in a year. A large retention award to a senior leader can cross that line; plan it with the company secretary before the conversation, not after. The tax falls on the employee at exercise and again at sale; the [ESOP tax lesson](/library/esop-taxation-in-india-two-taxing-events) explains both events, and the [ESOP communication lesson](/library/esop-communication-making-equity-real) explains how to make any of these grants feel real.

Budgeting the pool for a hundred people

Refreshes are not free; they dilute every shareholder and consume a pool that also has to pay for new hires. Carta’s data shows companies from pre-seed to Series A allocating about 35 to 37 per cent of their equity pool to refreshes, and Series B to E companies about 40 to 50 per cent. Plan for it explicitly: when the pool is sized before a round, include a line for grants to existing staff alongside the hiring plan.

Build the budget bottom up. For a company of a hundred, count the people eligible for a tenure refresh this year, multiply by the average refresh by level, and add the expected promotions times the average top-up, the performance grants for the top fifth and a small reserve for retention. Convert to a percentage of fully diluted shares at the current price. If the total is more than the pool can carry alongside the hiring plan, lower the refresh size before narrowing eligibility, because a rule applied to everyone is easier to defend than one that quietly excludes people.

Grant early, grant on a calendar and grant by rule: a refresh that arrives after a resignation letter is a counter-offer, not a retention policy.

The annual equity review

Run it once a year, in the same sitting as the cash review, so cash and equity are decided together. For each person: their level, their performance, their unvested equity at today’s price and at year four, and what a new hire at their level would receive. Apply the rules in order: tenure refresh for everyone performing at level from year one or two, promotion top-ups for everyone promoted, performance grants for the top fifth, and retention awards for the named few. Total the grants against the budget, adjust the refresh size if needed, and take the plan to the board. Then write each person a one-page statement of what they hold and when it vests. Every quarter, list anyone whose unvested equity has fallen below half a new-hire grant and decide, before they do, whether that is acceptable.

Grant values are illustrative and at today’s price; equity can be worth nothing. Nothing here is legal, tax or investment advice.