Yusra3
VIP Contributor
A vesting schedule is a contract that sets out how much of an employee's stock options are earned over time. It's used as a way to ensure that employees get paid for their efforts, but it also helps them plan ahead and make sure they're not leaving money on the table by waiting too long to exercise their options.
The vesting schedule might be based on the number of years an employee has worked at the company or on some other formula. The most common vesting schedule is one in which the amount earned increases over time. for example, if an employee works for four years before exercising their options, they'll get more than if they had worked for only two years.
Vesting schedules can also be calculated using a sliding scale: some companies offer an option that gives employees more shares when they stay longer with the company (for example, if someone stays six months instead of three), while others give them less but provide more shares when they leave earlier (for example, if someone leaves after three months).
For example, let's say you're an employee and you've been working at your company for one year. You were given an option to purchase stock for $1 per share (so it would be worth $10). Your company has decided that instead of offering all of its employees the same option price, it will only offer half of them this option and then pay out half the shares at the end of each year until all employees have received their full shares.
This means that if someone gets hired after your first year but before two years have elapsed, they won't get any shares until after two years have elapsed even though they're already working!
The vesting schedule might be based on the number of years an employee has worked at the company or on some other formula. The most common vesting schedule is one in which the amount earned increases over time. for example, if an employee works for four years before exercising their options, they'll get more than if they had worked for only two years.
Vesting schedules can also be calculated using a sliding scale: some companies offer an option that gives employees more shares when they stay longer with the company (for example, if someone stays six months instead of three), while others give them less but provide more shares when they leave earlier (for example, if someone leaves after three months).
For example, let's say you're an employee and you've been working at your company for one year. You were given an option to purchase stock for $1 per share (so it would be worth $10). Your company has decided that instead of offering all of its employees the same option price, it will only offer half of them this option and then pay out half the shares at the end of each year until all employees have received their full shares.
This means that if someone gets hired after your first year but before two years have elapsed, they won't get any shares until after two years have elapsed even though they're already working!
