What is scheduled vesting?
Scheduled vesting is the standard equity-compensation arrangement under which an employee’s stock options or restricted shares vest gradually over a defined period — typically four years, with a one-year “cliff” before any vesting occurs. The pattern aligns long-term employee retention with the company’s equity value creation and is the canonical structure across venture-backed companies.
The standard 4-year / 1-year cliff schedule
- Year 1 — the cliff: nothing vests. If the employee leaves before the 12-month mark, they forfeit all equity. After the cliff, 25% of the total grant vests in one lump.
- Years 2–4 — monthly or quarterly vesting: the remaining 75% vests in equal monthly (or quarterly) increments — 1/48 of the grant per month, or 1/16 per quarter.
- End of year 4: 100% of the grant is vested. The employee owns the equity (subject to exercise for options) regardless of future tenure.
Variants seen in market
- Founders (sometimes): 4-year vesting with a 1-year cliff, often back-dated to company formation.
- Senior executives: 4-year vesting but with cliff variants (6 months, no cliff) negotiated at hire.
- Refresh grants: additional annual grants with their own 4-year schedules — the “double-trigger” with the original grant creates ongoing retention incentive.
- Performance-vesting: a portion vests on achieving specific metrics (e.g., revenue milestone) rather than time alone.
Scheduled vs. accelerated vesting
- Scheduled: time-based vesting per the original schedule, regardless of company events.
- Accelerated: vesting timetable speeds up on triggering events — single-trigger (acquisition only) or double-trigger (acquisition + termination without cause within 12 months).
Why founders should structure this carefully
Scheduled vesting is the primary retention mechanic in startups. Departing employees forfeit unvested equity; surviving employees own progressively more. Without scheduled vesting, an early employee could leave after one year holding meaningful equity for which they did not contribute to long-term value.
Do: use the standard 4-year / 1-year-cliff structure for all employee grants from day one; document the schedule in the option grant agreement.
Don’t: deviate from market standards without strong reason — bespoke vesting schedules create administrative complexity and confuse investors in due diligence.