Vesting schedules serve dual purposes: they provide retention incentive (the employee forfeits unvested grants if they leave) and they spread the company’s compensation cost over multiple years rather than recognising it all at grant. The most common vesting schedule in tech is four-year vesting with a one-year cliff: 25% of the grant vests on the first anniversary of the grant date, then the remaining 75% vests in equal monthly or quarterly installments through the four-year point. Variations include three-year vesting (more common in mature public companies), back-loaded vesting (smaller percentages early, larger percentages later), and milestone-based vesting (tied to defined business or employee performance milestones rather than calendar time).
Vesting schedule design has significant implications for both the company and the employee. Cliff vesting protects the company from short-tenure employees walking with significant equity but creates a high-stakes retention milestone at the cliff date. Monthly post-cliff vesting provides smooth ongoing retention pressure. Acceleration provisions - the conditions under which unvested equity vests immediately - matter especially for senior roles in companies likely to be acquired; single-trigger acceleration (vesting on change of control alone) is rare; double-trigger acceleration (vesting on change of control plus termination without cause within a defined window post-acquisition) is more common.
Key Points: Vesting Schedule
- Defines when grants become employee property: Unvested portion is forfeited on departure; vested portion is the employee’s.
- Standard 4-year with 1-year cliff: 25% at year 1, then monthly through year 4 - dominant pattern in tech equity grants.
- Retention and cost-spreading purposes: Vesting schedules retain talent and spread compensation cost recognition over multiple years.
- Acceleration provisions matter: Single-trigger and double-trigger acceleration determine treatment in M&A scenarios.
- Refresh grants extend retention: Additional grants in subsequent years maintain unvested value and ongoing retention incentive.
How Vesting Schedule Works in Treegarden
Vesting Schedule in Treegarden
Treegarden’s offer letter module supports custom vesting schedule communication as part of the equity grant section, with clear visualisation of the time-to-fully-vested timeline and total grant value to help candidates evaluate the long-term economic value of the offer alongside immediate cash compensation.
Related HR Glossary Terms
Frequently Asked Questions About Vesting Schedule
The pattern emerged in Silicon Valley venture capital culture in the 1980s-1990s and became the de facto standard for tech equity grants. The reasoning: 4 years approximates the time horizon over which an employee’s contribution to the company can plausibly be evaluated; the 1-year cliff prevents short-tenure employees from walking with meaningful equity; monthly post-cliff vesting provides smooth ongoing retention pressure. Variations exist but the pattern persists because both founders and employees understand it as the default.
You forfeit the entire grant. Cliff vesting is binary - either you reach the cliff date and 25% (or whatever the cliff percentage is) vests, or you depart before the cliff and no portion vests. This is one reason the cliff date is one of the highest-stakes retention moments for both the employee and the company; departures shortly before the cliff date are common signals of either dissatisfaction or competing offers timed to avoid forfeiting the cliff vest.
Double-trigger acceleration is a provision in the equity agreement that causes some or all unvested equity to vest immediately on the occurrence of two events: (1) a change of control - typically defined as acquisition, merger, or sale of substantially all assets; AND (2) involuntary termination of the employee’s employment without cause within a defined window (typically 12-24 months) after the change of control. The double-trigger structure protects employees from being terminated by acquirers shortly after the deal to avoid the equity payout, while preserving the acquirer’s ability to retain employees they want to keep.
Yes, particularly for senior roles. Common negotiation points include: cliff length (some senior candidates negotiate elimination of the cliff in favor of monthly vesting from grant date), total vesting period (3-year vs 4-year), acceleration provisions (single vs double trigger; what constitutes ‘cause’ for the acceleration purposes), and refresh grant timing (some candidates negotiate explicit refresh grant commitments at year 1, year 2, etc). Junior roles typically have less negotiation leverage on vesting; senior candidates routinely negotiate these terms.