How Does Cliff Vesting Work?

Cliff vesting is a type of vesting schedule where an employee must work for a set period before gaining any ownership of a benefit—typically equity like stock options or RSUs. If the employee leaves before the "cliff" period ends, they forfeit all unvested benefits. Once the cliff is reached, a significant portion (often the first chunk) vests all at once.

For example, if you're granted 1,000 RSUs with a 4-year vesting schedule and a 1-year cliff, you won’t own any of the shares until your first work anniversary. On that date, 25% (250 shares) vest. After the cliff, the rest usually vests monthly or quarterly over the next three years.

Cliff vesting is a common way for employers—especially startups—to protect themselves from giving away equity to short-term employees.

Key Features:

• All-or-Nothing Period: No benefits vest until the cliff date is reached.
• Common Duration: 1-year cliff is standard for equity plans.
• Post-Cliff Schedule: After the cliff, vesting typically becomes gradual (e.g., monthly or quarterly).
  

Where You’ll See Cliff Vesting:

• Restricted Stock Units (RSUs)
• Stock Options
• Employer RRSP or pension matching (in some cases)

Why Employers Use It:

• Encourages employees to stay longer before gaining ownership.
• Prevents equity from going to employees who leave within the first year.
• Simplifies administration—no vesting or payout calculations until the cliff is reached.
  

Things to Consider:

• If you leave before the cliff, you typically walk away with nothing.
• Once the cliff is reached, that first portion of your equity or benefit vests all at once.

Know your vesting schedule details—especially if you're considering leaving or negotiating an offer.