Vesting Schedule

Definition of Vesting Schedule

Vesting schedules delineate when an employee will get access to shares or stock options that have been reserved for them.
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Without a vesting schedule, employees would immediately get access to stock or grants and would have no incentive to stick around. As such, vesting schedules motivate employees to stay with the company.

A startup might, for example, have its employee stock options vest over four years on a quarterly basis. However, there is requirement that vesting be equal over time. So, another startup might vest 50% after one year and vest 25% in each of the following years.

Finally, there are often employment agreement terms that lead to immediate vesting. For example, in the event of a change of control, all employee stock options might vest.

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