What is Vesting Cliff?
The minimum tenure before any equity is earned - usually the one-year mark.
Vesting Cliff: definition
The cliff is the "all or nothing" front end of a vesting schedule. In the standard one-year cliff, an employee who leaves before their first anniversary earns zero equity; on the anniversary, a chunk (typically 25% of a four-year grant) vests at once, and normal monthly vesting continues after that. The cliff protects the company from granting equity to people who do not stay.
- No equity vests during the cliff period (commonly the first 12 months)
- Leaving before the cliff forfeits the whole grant
- At the cliff, a lump portion vests (e.g., 25% of a 4-year grant)
- Monthly (or quarterly) vesting resumes after the cliff
How Fintra handles it
Fintra models the cliff within each grant’s vesting schedule, so pre-cliff grants show zero vested and the correct lump vests on the cliff date. If someone departs before the cliff, Fintra forfeits the full grant back to the pool and reverses any provisional stock-comp expense, keeping the cap table and books accurate.
Worked example
Frequently asked questions
Why do companies use a vesting cliff?
To ensure equity goes to people who commit for a meaningful period. The cliff means a short-tenured employee earns nothing, protecting the cap table from fragmenting into tiny stakes held by people who left quickly.
What is a one-year cliff?
The most common cliff: no equity vests for the first 12 months, then a lump (typically 25% of a four-year grant) vests on the one-year anniversary, with the rest vesting monthly thereafter. Leaving before month 12 forfeits everything.
Do all grants have a cliff?
No, but most initial employee grants do. Refresh grants and some executive packages may vest without a cliff or on different terms. The cliff is a policy choice; Fintra supports schedules with or without one.
How does Fintra handle cliffs?
Fintra models the cliff in each vesting schedule, shows zero vested before it, vests the lump on the cliff date, and forfeits the full grant if the person leaves beforehand - reversing any provisional stock-comp expense.
Keep going
Stay in the loop
One practical finance briefing a week - new guides, checklists, and benchmarks.
See how Fintra handles the numbers behind this term
Fintra is the AI Finance Operating System for SMBs - accounting, planning, payroll, equity, and AI governance on one shared data model, with a named human approving anything consequential. Free to start, no card required.
Talk to us