A change to Google's compensation policy means employees can cash in more of their equity awards sooner, a move that could make the search giant more competitive against big tech rivals in the battle for talent.
Traditionally, restricted stock units awarded to Google employees in their compensation package would vest evenly over four years, but Google has moved to a new model that vests at 33% a year for the first two years, 22% in the third year, and 12% in the fourth year, Insider has learned.
The new system — an approach sometimes known as "front-loading" — began in May, according to an employee who asked to remain anonymous. A Google spokesperson confirmed the new system in an email to Insider and said the new policy was applied globally.
It means Google can offer a more compelling compensation package upfront, which could lure talent away from companies like Apple and Facebook. It also smooths out the cash flow over time, as employees will sometimes get additional stock grants over a period of time with the internet giant.
Google loosens the 'golden handcuffs'
Google may also risk higher attrition as employees get more of their stock sooner and feel less compelled to stay for the full payout.
"Google is not a conventional company, so it's not unusual for us to run pilots and evolve our compensation processes as we understand what's working and what could work better for our employees," a Google spokesperson told Insider. "Even as we scale, it's important that we continue to pay at the top of the market for all roles and levels, while providing an equitable experience for new hires."
Google began piloting different vesting timelines in 2019, including a more front-heavy model that vested 36% in the first year. But Zuhayeer Musa, a cofounder of the salary database Levels.fyi, said there was an uptick in Google employees reporting the newer vesting schedule in June.
"In Google's case, every offer we've seen reported in the last month has had the new schedule," he told Insider this week.
Four-year vesting cycles have long been the norm at big tech firms, where much of employees' wealth is generated by equity. Facebook, Apple, and Microsoft continue to take a more traditional approach in which stock vests steadily at 25% a year, while some companies, such as Stripe, have recently moved to a model where employees' entire stock awards vest within the first year, according to data compiled by Levels.fyi.
Amazon sits at the opposite end with an aggressively back-ended schedule in which the majority of employee's equity awards vest in the third and fourth years, according to Levels.fyi data.
In recent years, many big tech companies, including Google, have also got rid of the one-year cliff, where stocks don't vest until the employee's one-year anniversary. Equity now vests over the course of the year instead.
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