Contract Glossary
Vesting Schedule
Definition
A timeline that determines when an individual earns full ownership of an asset — typically stock options, equity grants, or retirement contributions. Until vesting occurs, the asset belongs to the company. Vesting schedules incentivize long-term commitment by releasing ownership gradually over time.
In Practice
You join a startup and receive a grant of 40,000 stock options with a four-year vesting schedule and a one-year cliff. This means you earn nothing for the first 12 months. On your one-year anniversary, 10,000 shares vest at once (the cliff). After that, the remaining 30,000 shares vest monthly — roughly 833 shares per month — over the next three years. If you leave after 18 months, you walk away with 15,000 vested shares. The other 25,000 are forfeited.
Example Clause
The Option Shares shall vest over a four (4) year period, with twenty-five percent (25%) of the Option Shares vesting on the first anniversary of the Vesting Commencement Date (the 'Cliff Date'), and the remaining seventy-five percent (75%) vesting in equal monthly installments over the thirty-six (36) months following the Cliff Date, subject to Optionee's continued service with the Company.
Common in these contract types
Related contract clauses
Related articles
Freelance Contract vs Employment Agreement: Key Differences
Freelance contracts and employment agreements define different relationships. Learn the legal distinctions, tax implications, and which fits you.
Non-Compete Clause: Is It Enforceable?
Non-compete clauses restrict where you can work after leaving a job. Learn which states enforce them and how to negotiate fair terms.
Contractor vs Employee: Which Contract Do You Actually Need?
Contractor or employee? Avoid misclassification penalties. Compare contracts and create the right agreement for your hire.
Frequently asked questions about vesting schedule
Unvested shares are forfeited — they go back to the company's option pool. You only keep what has vested as of your departure date. Some agreements include acceleration provisions that speed up vesting upon termination without cause, change of control (acquisition), or other trigger events. Check your grant agreement for acceleration terms before assuming forfeiture is absolute.
Create a contract with proper vesting schedule clauses
Generate a professional contract in minutes with all the essential clauses — no legal expertise needed.
Create your contractThis content is for informational purposes only and does not constitute legal advice. For contracts with significant financial or legal implications, review by a qualified attorney is recommended.