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Cliff vesting

What is cliff vesting?

"Cliff vesting" is a term used in equity-based compensation that refers to the period before an employee fully owns their shares or options. With cliff vesting, the employee earns the right to their full benefits after a specified period, typically one year, rather than gradually over time.

This vesting schedule is often used in startups where employee retention is critical. If an employee leaves before the cliff period ends, they walk away with nothing. But if they stay past the cliff date, they suddenly vest a significant chunk of their equity. After the cliff, vesting usually happens on a monthly basis. Cliff vesting is a way to incentivize employees to stay with the company and contribute to its growth.

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