Equity is a mysterious vehicle for lots of people. Some candidates might balk at being offered a $50,000 (one-year) grant instead of a $200,000 (four-year) grant.Your company’s offer might look less competitive compared to a higher-value grant from another company.Companies need to be ready to communicate the total picture of their compensation packages and show how their offer adds value for the candidate.

Another challenge for employers is that a one-year grant creates less incentive for talent to stay with the company. Some candidates who are great negotiators might insist on a bigger first-year grant than the company offered, and then leave the company after one year.

Companies like <a dir="ltr" href="https://www.crunchbase.com/organization/coinbase">Coinbase </a>, <a dir="ltr" href="https://www.crunchbase.com/organization/lyft">Lyft </a>and <a dir="ltr" href="https://www.crunchbase.com/organization/stripe">Stripe </a>are turning over a new leaf when it comes to how they handle equity grants and vesting schedules: Instead of the standard four-year vesting equity grant for new hires, these companies are now offering one-year vesting.

Tech companies and their employees today are in an environment of extreme uncertainty. Last year, while some companies were doing pay cuts, others had to conserve cash, and in order to stay competitive, ended up handing out more equity. In response to this uncertainty and a hypercompetitive market for talent, we’re now seeing a plethora of companies doing a one-year equity vest, instead of a four-year new hire grant with refreshes every year.

A four-year vesting schedule is no longer the right fit as flexibility becomes the norm

One-year vesting gives employers the flexibility to reduce their equity dilution. Your company might still be able to meet the market price for talent, while saving 75 percent of equity compared to a four-year grant.And one-year equity grants also give companies the flexibility to differentiate talent. The one-year grant lets employers evaluate talent year to year, and offer more shares based on performance without being locked into a four-year grant amount.One possible downside for employers is that a one-year grant can sometimes cause confusion or unintended consequences during negotiations

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