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:

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

Create Your Company's Vesting Schedule