Create Your Company's Vesting Schedule

Design a professional vesting schedule that helps retain key talent, align incentives, and distribute benefits fairly. Perfect for equity plans, stock options, and retirement benefits.

Vesting Schedule Template Guide

A vesting schedule determines when employees gain ownership rights to employer-provided benefits such as equity, stock options, or retirement contributions. This comprehensive guide will help you create an effective vesting schedule that balances employee retention with fair compensation.

What This Template Is For

This vesting schedule template helps organizations establish clear timelines for benefit distribution. It's designed for companies implementing equity plans, stock option programs, or retirement benefits that want to encourage long-term employee commitment while maintaining compliance with legal requirements.

When To Use This Template

Use this template when:

  • Implementing a new equity or stock option plan
  • Setting up retirement benefit programs
  • Revising existing vesting policies
  • Establishing employee retention incentives
  • Creating transparent compensation structures

How To Customize It

Follow these steps to customize your vesting schedule:

  1. Choose between time-based or performance-based vesting
  2. Select the vesting period (typically 3-5 years)
  3. Determine if you want a cliff period
  4. Set vesting increments (monthly, quarterly, or annual)
  5. Define the percentage of benefits vested at each milestone
  6. Add any specific conditions or triggers
  7. Include acceleration clauses if applicable

Common Use Cases

Vesting schedules are commonly used for:

  • Startup equity distribution
  • Employee stock option plans (ESOPs)
  • 401(k) employer matching
  • Restricted stock units (RSUs)
  • Performance-based incentive plans

Best Practices

  • Keep the schedule simple and easy to understand
  • Ensure compliance with local regulations
  • Document all terms clearly
  • Include examples for clarity
  • Consider market standards for your industry
  • Maintain consistent communication about vesting status

Template Variations

Common variations include:

  • 4-year schedule with 1-year cliff
  • Graded vesting over 5 years
  • Immediate vesting
  • Performance-triggered vesting
  • Hybrid schedules combining time and performance metrics

Success Stories

Companies have successfully used this template to:

  • Reduce employee turnover by 25%
  • Improve transparency in compensation
  • Attract top talent with competitive vesting terms
  • Align employee and company long-term interests

Frequently Asked Questions

What is a cliff period in vesting?

A cliff period is an initial duration during which no benefits vest. After the cliff period ends, the first portion of benefits vests immediately.

Can vesting schedules be modified?

Yes, but changes typically only apply to future grants, not existing ones, unless explicitly agreed upon by all parties.

What happens to unvested benefits if an employee leaves?

Typically, unvested benefits are forfeited upon employment termination, while vested benefits remain with the employee.

Are there legal requirements for vesting schedules?

Yes, certain retirement plans must follow specific vesting requirements under ERISA and IRS regulations.

Can vesting be accelerated?

Yes, through specific triggers like company acquisition or performance milestones, if included in the original agreement.