What are vesting and cliff?
Gradual build-up of the stake and a waiting period at the start.
Vesting means that employees do not receive their promised profit participation rights all at once but step by step over a set period. The cliff is a waiting period at the start during which nothing vests yet.
Example
40 options on profit participation rights, four years of vesting, a one-year cliff:
- Nothing vests in the first year.
- After one year, the person receives 10 options at once, i.e. what accumulated in the first year.
- After that, the remaining 30 options vest evenly until the end of the fourth year.
Good to know
- On the platform, the cliff counts towards the vesting period and is not added on top.
- The person can convert vested options into profit participation rights (create them) at any time. Only then does the taxable event occur.
- You set individual rules, for example for part-time work or accelerated vesting on exit, in the allocation conditions (side letter).
More on this: How does employee participation with beel work?