Answers you got from astuyvenberg and eugenekolo are incorrect. That's not how it works.

The way it actually works is that when you join, you get a starting grant that vests over next 4 years, and then every year, you get a so-called refreshers, each of which is roughly a quarter of your original grant, which also vest over 4 years. This means that in year 4 of your employment, you get a (last) quarter of your original grant, along with a quarter of each of the 3 refreshers you received in the next 3 years. Then, in year 5, your original grant is gone, and you only get a quarter of each of the 4 refreshers you got in past 4 years.

Depending on the size of your original grant, and the size of refreshers, this can result in some pay cut in year 5. This pay cut can be bigger or smaller, depending on the size of your original grant, size of refreshers (which are driven by your performance rating/promotions), stock price in year 5 etc. However, other than some special circumstances where you get some additional discretionary stock grant, after year 5 you kinda reach a steady state, and your the value of your stock compensation can go down pretty much only if the stock price goes down (assuming constant performance over time).

You've identified the biggest cause, but there are other factors as well.

For example, refreshers are always granted at the end of the year and are only granted to employees that have been with the company a set amount of time. What this means is that new employees starting in the summer don't get a refresher until they've been with the company for ~18 months. So when their initial grant runs out, there's actually a gap of ~6 months where they are only earning equity from three grants while they would need four grants to fully match the equity they were earning during the prior period.

Also promotion at Google is not easy to get. The competition is stiff, the standards are high, and you have to manage to get assigned to the kind of tasks and projects that get you promoted. I saw great people sit at one level the whole time they were there.

The quest for a promotion-worthy project (that manages to ship, no matter the consequences) definitely drove some bad behaviors from people I worked with while I was there.

A weird fact about the universe: in a competitive environment, the difference between winners and losers is mostly luck.

It's always the network..

Just sayin'.

Hell even consumers see it. Messaging apps, for instance.

But given the explanation above, everyone would see a drop after year 4, regardless or promotions. If you happen to get a promotion and a big refresh perfectly timed with that initial grant ending, you may be able to level off the cliff, but that's just pure happenstance. If you had gotten the promotion grant a year sooner, you would've ended up seeing the drop the next year.

"Some special circumstances" can also mean where stock prices go down low enough to bring employees below their compensation target. It doesn't happen much lately at tech companies because the stocks are soaring, but it used to be more common. In those cases, many employees can receive more stock to bring them up to target. It puts a real and meaningful floor on stock price risk and is a nice fringe benefit for companies that do this.

> That's not how it works.

...okay, uh, except for when what they explained is exactly how it works.

Lots of people, at lots of companies, Google and Facebook included, get meaningful add-on grants, often larger than their initial ones.

These are frequently timed to the 4-5 year mark and especially handed out alongside promotions, for the exact reason that, otherwise, the employee will suddenly have a much lower annual payout and will be less 'aligned' with the with the company's future interest.

I'm not claiming that what you said does not also happen, but what the others said certainly does too, and there's no reason to phrase this as some sort of definitive-exclusive thing.

> Lots of people, at lots of companies, Google and Facebook included, get meaningful add-on grants, often larger than their initial ones.

This is I guess sort of true. They're certainly meaningful, it's unusual for them to reach the size of your initial grant quickly, and they'll usually trend upwards over time.

> These are frequently timed to the 4-5 year mark and especially handed out alongside promotions

This is empirically untrue.

It may be true at some companies, but it is rare enough to be a blip at Google or Facebook ("Discretionary Equity" is the term, and its very rare).

How these companies actually work is that there's a target stock grant at your level, let's say 50K. Your initial grant is larger (potentially much larger, depending on a number of factors, but usually 2-3x larger at a minimum). Higher performance increases the grant size, and promotion increases the target.

So there's nothing particularly timed specially at the 4-5 year mark that increases the grant size.

For reference, my stock grants (which are more or less typical) were ~130K at hire, 30K, promo 70K, 100K, 105K (I've reached the ceiling at my current level).

My 130K at hire was above average for a new grad, but an experienced industry hire could get 200K+, and still experience the refresh grants I got.

My employer (Google) has been giving me add-on grants for as long as I've worked there (over 11 years). The number of pre-vest shares have increased over time (they give me larger add-ons). The biggest hit I took was leaving to work for a startup for a year and then returning, because that reset everything. I walked away from some absurd amount of pre-vested shares.

I think my experience is fairly typical for senior/staff level employees with a long tenure, based on what I've heard from friends, coworkers, and HN comments.

Thanks; I appreciate a lot that you qualified what you said, and gave a justification for why your perspective is broadly true, rather than just assert a negative as a universal.

I was mistaken. I didn't know that FAANGs (and likely similar) mostly do comp in this specific way that is different from other comp structures I've interacted with or known of, even despite interning at Google myself, and having friends work there and at others similar, whom I've discussed comp with at length.

Somehow this point about stock grant structure has just never come up, and I've personally experienced the opposite, so I felt the strength of the assertion was unwarranted -- but anyway, I'm glad to learn it!

The best way to think of it is, FAAMG are money guns and your job is to build bullet-proof buckets.

FWIW, Google's vesting schedule is heavily frontloaded to reduce the "4 year cliff"

This is a recent change, and as far as I know, not yet true for all new hires.

At Google you start with an initial large grant that vests over 4 years. For example, let's say you get 400k as stock that vests over 4 years and 100k as salary to make math simple.

So you get 200k the first year, and at the end of the year you get another stock grant that vests over 4 years. Let's say you get 80k.

The second year you get 220k (100k salary + 100k stock from initial grant + 20k from first year's grant). Let's say you get the same 80k again.

If this process continues, the fourth year you get 260k, but on the fifth you will get 180k. Typically what happens is that unless you get promoted 2 times in those 4 years, your salary will decrease substantially on your fifth year.

I've simplified things a bit, but that's the general gist of it.

But given this math, everyone will always see a drop after the 4th year. You can kinda level off the drop if you get promoted exactly as your initial grant runs off, but that's mostly coincidence. If you get your promo grant a year sooner or later, you'll get different drops and hikes.

The author trying to connect the 5th year cliff, which is a common issue, to the lack of promotion, seems a bit misleading.

Typically you get a signing bonus that vests of a period of X years. Once those X years are done, you are relying on additional stock grants from past performance reviews or promotions to keep your comp at its previous value.

If you perform well or get promoted you should see your compensation increase, but without that you are left with your base salary and no additional stock grants and can take a pay cut as a result.

Its one way FAANG weeds out lower performing engineers.

> Its one way FAANG weeds out lower performing engineers.

I believe you.

And without any judgement on her specific case, I can also believe it is a way for "The Company" to discourage "confronting" the structure

My guess is they had stock grants whose value went up as the share price rose. As a result they were being paid more than their level and performance rating would typically dictate and to sustain that level of pay they would have needed a promotion. When that didn’t happen, their pay fell to what their intended pay grade was, but in relative terms it amounted to a pay cut.

When you sign on at a FAANG - you get a sign on package. This includes stock grants that vest over time. After that time runs out, if they like you, they will promote you and give you a new batch of grants. If you don't think you are great, no promotion and no new stock grants. So while you are not demoted, your actual pay drops sometimes significantly.

There is a good reason for this. It allows them to drive increased turnover at higher levels in the org where it's normally hard to transition folks out. They just don't refresh equity or promote with a new equity grant.

Anyways, the poster did what anyone should do - quit and find somewhere else to work.

I was a little confused by that. Unless she had a very large signing bonus grant, she should have been getting stock grant refreshes yearly specifically to prevent that kind of drop off in total pay.

Especially with high performance ratings, she should have been getting bonus over target and extra stock.

It sounds instead like her manager screwed her over on stock grants to get her to leave.

> Especially with high performance ratings, she should have been getting bonus over target and extra stock.

In these companies each level has a compensation bracket. With high rating it’s easier to hit that upper limit and without timely promotion total compensation can take a nosedive when initial grant dies out.

Not sure how that turns into a decrease in total comp instead of flattening out, unless the initial grant put them over the limit in the first place. In which case it was a really generous recruitment bonus.

It’s four years of growth that makes the initial grant look generous. For example $GOOG was like $800 in April’17. It’s over $2250 right now. $AMZN went from $900 to $3300 during the same time.

You typically get stock on a 4 year vesting cycle. After the 4 years a few things can happen: you get another 4 year stock vesting cycle, you get no stock, you get something else.

Most offers for FAANG companies include salary and stock compensation, that vests over 4 years.

So if you were granted 400k in stock over 4 years, you'd get 100k per year in stock (which you can keep or sell, but it's real compensation).

After those 4 years, the company will either give you another stock grant over another 4 years, or they will decide to show you the door - and not offer you anything.

That's what seems to have occurred here.

This is incorrect. At FAANG companies, in my experience, you will be given an initial large grant and an additional grant every year thereafter. However, if you aren't seeing upward performance, those annual grants may not fully match the compensation you received from the initial grant, resulting in a dip at year 4 that some folks call "the four year cliff."

This is complicated by the fact that earlier grants tend to be from when stock was worth less, so the are a comparatively high number of shares. So your comp will gradually inflate over 4 years because the value of the stock has gone up, meaning you are taking home more than the company 'intended' to pay you.

Really? When I've worked at FAANGs and other BigCos, there was a yearly re-up of stock vesting over 4 years each time.

It is all up to management discretion. I have known several cases where people's new stock grants were cut to zero in the hope that they'll just quit and save managers from going though the PIP/firing process.

For sure. At least at amazon while they don't demote you, if they are not that excited by you on the team equity goes pretty low.

https://www.lastweekinaws.com/blog/aws-compensation-explaine...

Depends on performance. Corey Quinn's article is on point (linked a few comments below)

This makes sense, but specifically promotion tied bundle? Or was it just a shortcut for "did not get promoted" AND "did not get next stock grant"?

I guess I am trying to understand whether this is causation or correlation relationship.

Your total compensation at FAANG is base salary + bonus (usually % of your base multiplied by your perf and company perf) + stock.

When you get promotion your base salary will increase, your bonus will also increase (due to being % of base, but also higher levels have higher %) and your annual stock refresher will be higher, as you are now on new level.

She would get annual stock refresher even without promotion, but with promotion refresher would be bigger and total new comp could have compensated for drop after initial grant has finished.

You can check levels.fyi for comparisons of total median comps between levels at Google.

L3 - $189k[0], L4 - $265k [1], L5 - $350k [2]

[0] https://www.levels.fyi/company/Google/salaries/Software-Engi...

[1] https://www.levels.fyi/company/Google/salaries/Software-Engi...

[2] https://www.levels.fyi/company/Google/salaries/Software-Engi...