What is cliff vesting?

Cliff vesting is a type of vesting schedule used by companies to grant restricted stock options or other equity instruments to their employees. This schedule ensures that employees only receive the full benefits of their stock options after a specified period of time known as the cliff period. This means that the employee must be employed for the entire duration of the cliff period before they can fully receive the benefits of their stock options.

The cliff period typically lasts for a year, but it can vary based on the company's policies. After the cliff period, the stock options vest regularly over time, usually on a monthly or quarterly basis. Cliff vesting is a way for companies to retain their employees for the long term by incentivizing them to remain with the company until the cliff period is over.

Cliff vesting also protects companies from employees who may leave soon after receiving stock options, as they will not receive the full benefits until they have been with the company for the duration of the cliff period. Overall, cliff vesting is a popular method of offering employee equity rewards, as it incentivizes employees to stay with the company while also protecting the company's interests.