Specifically: "When I didn’t get a promotion, some of my stock grants ran out and so I effectively took a big pay cut." - I think I roughly get what it means, but not specifically. Could some insider explain this?
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).
...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.
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.
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.
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!
Just sayin'.
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.
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.
The author trying to connect the 5th year cliff, which is a common issue, to the lack of promotion, seems a bit misleading.
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.
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
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.
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.
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.
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.
https://www.lastweekinaws.com/blog/aws-compensation-explaine...
I guess I am trying to understand whether this is causation or correlation relationship.
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...
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.