Vesting Schedule

The timeline over which an employee gains full ownership of equity or retirement contributions.

A vesting schedule defines when you gain full, irrevocable ownership of equity (RSUs, stock options) or employer retirement contributions (401k match, pension). Vesting creates a time-based incentive to remain at a company — you earn the compensation gradually rather than receiving it all at once.

The most common equity vesting schedule in tech and startups is four years with a one-year cliff: nothing vests for the first 12 months, 25% vests at month 12 in a single event, and the remaining 75% vests monthly or quarterly over years 2-4.

Vesting schedules for employer retirement contributions work differently. Some employers immediately vest their 401(k) match — meaning the match is yours from day one. Others use graded vesting (e.g., 20% per year for 5 years) or cliff vesting (0% until 3 years, then 100%).

Equity grants don't end with your initial hire grant. Most established employers provide annual or biannual refresh grants — additional equity that vests on its own schedule — creating overlapping vesting tracks that increase retention incentives for long-tenured employees.

Common Vesting Structures

  • Standard 4-year / 1-year cliff: 25% at month 12, then monthly or quarterly over years 2-4. By far the most common in tech and startups.
  • Back-weighted: smaller percentages vest early, larger in later years. Used to extend retention pressure — be cautious of this structure.
  • Front-weighted: more vests early. More candidate-friendly; signals the company trusts you.
  • Monthly from day one (no cliff): vesting begins immediately. Rare but genuinely employee-friendly.
  • Performance-based: vesting tied to achieving specific milestones rather than time. Common for executive grants.
  • Double-trigger (private companies): equity requires both time AND a liquidity event. Means equity may never vest if the company doesn't exit.

The Cliff: Why It Matters More Than You Think

The vesting cliff is the single highest-risk period in any equity grant. If you leave at month 11, you receive zero equity regardless of your contribution. Companies sometimes time layoffs or performance actions just before the cliff date to avoid vesting events — this is legal and not uncommon. Be aware of this risk when joining companies with financial pressures or uncertain funding paths. If your cliff is approaching and you have any signal that your position is at risk, it's reasonable to raise the topic directly with HR.

Equity Refresh Grants

Refresh grants are the mechanism by which companies maintain ongoing equity retention incentives. At large public companies like Google, Amazon, or Microsoft, annual refresh grants are standard — employees receive new RSU grants each year, each on their own 4-year vesting schedule, creating an 'evergreen' equity position. Ask about the refresh cadence and typical grant size when evaluating any offer: a company that never refreshes equity effectively reduces your compensation every year as your initial grant vests out.

401(k) Vesting: A Different Type

401(k) vesting applies to the employer match on your retirement contributions, not to your own contributions (which are always immediately yours). Federal law caps cliff vesting at 3 years and requires graded vesting to be complete within 6 years. Before leaving a job, always check your 401(k) vesting status — unvested employer contributions are forfeited when you leave, and this can amount to thousands of dollars.

When to Time Your Departure Around Vesting

  • If a quarterly vesting event is 2-4 weeks away, ask your new employer to accommodate a slightly later start date — most will.
  • If the 1-year cliff is 1-2 months away, weigh the value of waiting against the cost of staying.
  • Calculate not just the next vest, but the full schedule — sometimes a vest 6 months away is worth more than the next quarterly event.
  • Factor in tax timing: a vest on December 31 vs. January 1 affects which year's income the shares count toward.
  • Don't let vesting alone keep you in a role that's damaging your career or wellbeing.

Example

You receive a $100K RSU grant over 4 years with a 1-year cliff. Leave at month 11: $0. Leave at month 13: ~27% vested (~$27,000). Leave at month 25: ~50% vested (~$50,000).