Vesting

Vesting gives employees rights to employer-provided assets over time, and it defines how long employees have to remain with the company in order to earn the full granted amount of options.

option_vesting_graph

For example, a 4-year vesting duration would mean that after 4 years, all of the granted stock options are fully owned by the employee. In the graph above you can see how the options were granted on the 10th of January 2022 and they will have finished vesting on the 10th of January 2022.


Vesting interval

The interval determines in what increments the grant vests. The terms vary from company to company (monthly, quarterly, every 6 months, etc.) For instance, a monthly interval means that the grant is released in equal parts every month.

Ledgy doesn't support fractional shares, so the numbers will always be rounded.


Cliff

A cliff is the minimum number of months that an employee has to stay at the company before receiving the first batch of vested options. This term also varies by company and it can range greatly. Cliff only means that the first portion of the vested options is available to you after a fixed period of time.

In the graph shown above, the cliff is of 1 year. And you can see here below how at the end of the cliff a determined amount of options will vest at once. In this case, 25% of a total 100 options.

option_vesting_cliff

There can be different types of time-based vesting and every equity plan can be different. Always check with your employer if the rules of the scheme are unclear.


Performance-based vesting

Additionally, the vesting can be also structured to vest only when performance conditions are met (e.g. KPIs). This is done to incentivize employees to perform well and is not linked with seniority.

Did this answer your question?