Skip to the main content.
Talk to an expert
Talk to an expert
Featured Offer
Ambitious 50 →
6 months of Hire and Engage free for businesses under 50 people.

Hey Compono!

A coach that actually gets you.

Get 10 minutes free, then $15 a month. Cancel anytime.

Get Started ≫
HR Glossary

Vesting

Pay and remuneration
What is vesting?

Vesting is the process by which promised equity or benefits become actually owned over time. A typical arrangement vests over four years with a one-year cliff: nothing is owned in the first year, a quarter vests at the anniversary, and the rest vests progressively after that.

How vesting schedules work

The schedule turns a grant into an earnings stream: a four-year monthly vest with a one-year cliff means an employee who leaves at month eleven owns nothing, one who leaves at month thirteen owns just over a quarter, and one who stays the course owns it all. Cliffs exist to protect the company from short stays; progressive vesting after the cliff keeps the incentive alive every month.

The design choices that matter

Time-based vesting rewards tenure; performance vesting adds conditions (revenue, milestones) that must be met as well; hybrid schedules do both. The other levers are acceleration (what vests early on a sale of the company, single or double trigger) and leaver terms (what happens to vested and unvested equity on resignation, dismissal and redundancy, and how long options survive after exit). Most equity heartbreak lives in leaver clauses nobody read at signing.

Vesting beyond equity

The same mechanics appear elsewhere: retention bonuses that vest at a date, long-term incentive plans that vest on performance, and (in some countries) employer retirement contributions that vest with service. Anywhere value is promised now and owned later, the vesting terms are the substance of the promise.

Next step

Calculator

Employee Retention Rate Calculator

Put a number on it. Free, no sign-up, every benchmark sourced.

Open the calculator →Related term

Equity compensation

Equity compensation is pay delivered as ownership rather than cash: shares, options, restricted stock units or other rights whose value tracks the company.

Read the definition →Related term

Employee share scheme (ESOP)

An employee share scheme gives employees ownership in the company they work for, through shares, options or rights, usually earned over time.

Read the definition →Related term

Restricted stock units (RSUs)

Restricted stock units are a promise to deliver company shares on a future schedule, usually tied to continued employment.

Read the definition →Related term

Golden handcuffs

Golden handcuffs are pay structures that make leaving expensive: unvested equity, deferred bonuses, retention payments and repayable benefits that are forfeited on exit.

Read the definition →HR Glossary

All terms

Every definition, with the local rules, rates and thresholds attached.

Browse the glossary →

Where
Compono Engage fits.

Compono Engage is an employee engagement platform that reads culture and climate alongside work personality, team by team.

Retention by design beats retention by accident.

See how it works
Compono Engage
8%+
reduction in turnover

Common questions

What happens to unvested equity when someone leaves?

By default it is forfeited; that is what unvested means. Good-leaver provisions, board discretion or negotiated exits can vary it, but the schedule is the rule unless something says otherwise.

What is a vesting cliff?

A minimum period before anything vests at all, typically one year. It protects the company from granting ownership to very short stays, at the cost of an all-or-nothing anniversary that everyone involved should track.

This page is general information, not legal advice. We check figures annually and update them on a best-efforts basis, but employment rules change and we cannot promise everything here is current or complete. Before you act on it, confirm the detail with the official source for your jurisdiction or your own adviser. Last reviewed July 2026.