What does vesting over 4 years mean?

With time-based stock vesting, you earn options or shares over time. Most time-based vesting schedules have a vesting cliff. After the cliff, 1/36 of the remaining granted shares (or 1/48 of the original grant) vest each month until the four-year vesting period is over. After four years, you are fully vested.

What is vesting period in RSU?

Vesting period refers to a predetermined amount of time until when restricted share units cannot be sold. Companies tend to vest such stocks to ensure timely benefit only when certain parameters are satisfied. For example, a vesting period for RSUs can end after the concerned employee surpasses performance milestones.

How long is typical vesting period?

When an employee is vested in employer-matching retirement funds or stock options, she has nonforfeitable rights to those assets. The amount in which an employee is vested often increases gradually over a period of years until the employee is 100\% vested. A common vesting period is three to five years.

Is RSU part of salary?

Remember that the RSUs are a part of compensation and should be treated as such.

What is a 4 year cliff?

4 years with a one-year cliff is a vesting schedule typically used in startup stock. It means the stock grant, typically options, will be fully vested after 4 years. Each founder vests a quarter of their shares, with vested transfers coming monthly after that.

How does 3 year cliff vesting work?

Under a three-year cliff vesting schedule, participants are 100\% vested in the employer contributions when they are credited with three years of vesting service, but are 0\% vested at all prior points.

What is the vesting period for a RSU?

For a 4 year vesting period, you normally vest 1/4 of the shares on your one year anniversary, then 1/48 of the shares every month thereafter, for the next three years. RSUs are a retention tool, so employees who leave before one year get zero shares, and you have to stay a full four years to get all your shares.

What is an RSU (restricted stock unit)?

RSU’s are restricted stock units, which is essentially a stock grant (gift) to the employee. RSU’s typically vest over 36 or 48 months. For a 4 year vesting period, you normally vest 1/4 of the shares on your one year anniversary, then 1/48 of the shares every month thereafter, for the next three years.

How many RSUs did you receive?

You received 20 RSUs, vesting at 5\% 1st year, 15\% 2nd year, and 20\% every six months in years 3 and 4. You likely received a signing bonus for years 1 and 2, covering the difference of 8 shares in years 3 and 4, worth about $8K each year, versus $1K in year 1; or $7K in year 1 and $5K in year 2.

What is a 1-year or 4-year vesting period?

You both agree to 4 years vesting period with a 1-year cliff. That means that the employee will now have to work 4 years before they can get all of the equity that was promised to them. A 1-year cliff is a form of ‘probation’ if you will. They have to at least work one whole year before they can start to earn their equity.