RIP 'rest and vest.' Big Tech has a new way of paying employees.

"This is "one of the biggest stories of the year for tech employees and it's going largely unnoticed," according to Zaheer Mohiuddin, cofounder of Levels.fyi , which helps Silicon Valley workers assess compensation offers. He's talking about front-loaded equity vesting schedules, which are spreading through the industry and threaten the longstanding practice of " rest and vest." Traditionally, employees could count on steady equity payouts regardless of their ongoing performance, which sometimes incentivized people to coast after securing their stock grants."

"The shift ties long-term pay more closely to individual output and company performance. High achievers may see their equity compounding significantly, but those who underperform risk diminished payouts. That's because in their second, third, and fourth years, there's a lot more riding on a fresh assessment of tech workers' performance. If they've underperformed, managers can decide to give them less equity in their annual refresh. This cuts the likelihood of staff coasting, especially in years three and four."

Front-loaded equity vesting shifts large portions of stock grants into the first one or two years, for example 40% in year one and 30% in year two, then tapers in later years. Long-term compensation increasingly depends on annual performance-based refresh awards rather than automatic vesting. High performers can compound significant equity, while underperformers risk reduced refresh grants and diminished payouts. Managers gain discretion to reduce equity in years two through four based on assessments, which discourages coasting. Major tech firms including Nvidia, Airbnb, and Google have adopted variants of front-loading. Employees must sustain consistent results to maintain competitive pay.

Read at Business Insider