A vesting schedule outlines when an employee earns the right to full ownership of employer-provided benefits—typically things like company shares, stock options, or pension contributions. Vesting is especially common in equity compensation plans, where it ensures employees stay with the company for a certain period before fully “owning” the value they've been granted.
For example, let’s say an employee is granted 1,000 RSUs with a 4-year vesting schedule and a 1-year cliff. This means they earn no shares until they’ve worked one full year. After that first year, 25% (250 shares) vest all at once. The remaining 750 shares vest monthly or quarterly over the next three years.
Vesting schedules are designed to reward long-term commitment while protecting companies from giving away benefits to short-term hires.
A liquidity event is a business milestone that allows shareholders—such as founders, employees, and investors—to convert their equity into actual cash.
Learn MoreAn exercise window is the period during which an employee can purchase (or “exercise”) their stock options after they’ve vested.
Learn MoreCliff 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.
Learn MoreAn Employee Stock Purchase Plan (ESPP) is a company-run program that allows employees to buy shares of their employer’s stock—usually through automatic payroll deductions and often at a discounted price.
Learn MoreRestricted Stock Units (RSUs) are a form of equity compensation that gives employees the right to receive company shares after certain conditions are met—typically a vesting period based on time or performance.
Learn MoreAn Employee Stock Ownership Plan (ESOP) is a workplace program that gives employees a financial stake in the company by making them part-owners through shares.
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