A vesting schedule is a predefined schedule that determines when you will begin to vest into the stock based compensation plan. Most often these are time related metrics, but they can also be performance based.
What is a vesting schedule?
A vesting schedule is an agreement between an employer and an employee that outlines the employee’s ownership rights in the company's equity such as stocks or options. Vesting usually occurs over time, with the employee slowly accruing more ownership rights as they stay with the company for longer periods of time.
Are there different kinds of vesting schedules?
Yes, there are various types of vesting schedules, including cliff vesting and graded vesting. Cliff vesting requires a minimum period of service before any equity vests while graded vesting awards equity incrementally over time.
How is the length of a vesting period determined?
The length of a vesting period is typically set by the employer or negotiated in conjunction with the employee during hiring. Vesting periods generally range from one to five years, depending on the type of agreement and other factors.
Can I transfer my vested shares to another person or entity before the end of the stipulated time period in my vesting schedule?
It depends--in some cases it may be permissible under certain conditions set out in your agreement with your employer; however, it is important to contact your employer’s legal department for specific advice regarding this matter so that you can understand all potential implications beforehand.
Is it possible to accelerate the completion of my vesting schedule?
Vesting schedules can be accelerated at the issuing company's discretion or by the vesting schedule terms. Typically the employee does not have the right to unilaterally acceleration the pace of their vesting
How does a vesting schedule affect me?
A vesting schedule is beneficial to both employers and employees as it allows employers to retain good talent while providing employees with incentive based compensation plans that reward loyalty and hard work by gradually granting them more ownership rights in the company’s equity over time. These plans provide employers with an additional tool when negotiating employment terms with new hires while helping current employees feel increasingly invested in their success at their job because they have more skin in the game as they move up within an organization.
