Learn how to set up, edit and manage vesting schedules.
It's official, the board of directors at your company have decided to grant equity to their employees! But, how will this equity be distributed? Will it begin to vest on the same day and at the same pace for each employee? The answer depends on the vesting schedule; the pre-set, pre-planned time frame that outlines how often each grant portion will be vested, until full ownership is achieved. It is your task to set up various vesting schedules and assign them to different employees (it’s really simple).
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Most companies have various vesting schedules; some schedules are created based on the time an employee joined the company, others are based on seniority level, and so on. The key benefits of Vesting schedules include:
- Save time: They are quick to set up and can be easily duplicated to create similar schedules.
- Automatic: Once a vesting schedule is created (and applied to a specific grant) the vesting. calculations that occur over time are automated, meaning no additional admin management or check-ups are required on your end!
How to Set up a Vesting Schedule
Within a few simple clicks, you will be all set up with a new vesting schedule. Follow the steps below to create a new vesting schedule:
- From the left menu, select Settings > Equity; you will be directed to the Equity page.
- Choose + New Vesting Schedule Note: If a vesting schedule has never been created before, then the Equity page will be empty. If you are adding an additional vesting schedule, tiles with all existing vesting schedules will be present.
- In the Details section, fill in/complete the following fields:Name: the name of the vesting schedule e.g., “4 yrs, 1 year cliff, monthly vesting”. This name will appear as part of the vesting schedule list in the equity table, on employee profiles.Description: a short description that can be as simple as a title, e.g., “Vesting schedule for C - level, post Funding Round.”
- In the Schedule Settings section: fill in/complete the following fields:
- Term (months): period of time in which the entire vesting happens, counted by months, e.g., for 4 years input “48” months
- Frequency (months): how often the vesting takes place, e.g., “3” months. Once the term and frequency have been determined, a table will appear that represents a simulation of your vesting schedule.
Note: Bob automatically does the math in the table for you, meaning all fields are configured for future vesting events.
- Set Cliff: Toggle on if the equity requires a cliff. The cliff determines when the first portion of your equity vests e.g., if options will only begin to vest after one year, then select “12” months. After the cliff, the equity grant will gradually vest based on the frequency chosen., e.g, every 3 months. (Click on the infotip, the i icon to learn more).
- Cliff (months): The number of months required before the cliff sets in, meaning the time from the vesting commencement date in which the first tranche will vest.
A Table will appear that details your vesting schedule, pre-calculated based on the values you input:
- Tranche#: The preset number of portions that make up your entire equity e.g., if there are 12 tranche numbers - the options will vest in 12 portions
- Interval (months): the frequency at which the options (or other equity type) vest, e.g., every “1” month, every “3” months
- Time from commencement date: The amount of time that has passed from the start date of the vesting schedule and all proceeding intervals
- % Vested: The percentage of options that are vested in this tranche out of the entire grant quantity
- Total % vested - cumulative: The cumulative percentage of options in the tranches that have already been vested. The last entry will equal 100% as it represents the culmination of the grant.
Note: the table presented to you is the default table that was created based on your entries. If you leave the table as is, the grant will begin to vest in accordance with the time you set, e.g., every 3 months for 4 years, from the applicable commencement date.
- Click Done. There it is, in all its glory; a new vesting schedule that is now ready to be assigned to employee grants!
How to edit a Vesting schedule
Whoops, do you need to edit some details? If you would like to edit the new vesting schedule before you exit this page, choose from the following option and then click Done.
Edit schedule: This option allows you to go back and edit the details of your vesting schedule; it is only available if the schedule was not already assigned and activated for an employee. If it was already assigned to one or multiple employees, this option will be greyed out. From the top menu, click Actions and select one of the options from the dropdown menu.
Note: If you would like to edit a vesting schedule after assigning it to an employee, simply delete the unwanted vesting schedule from the employee’s profile; Once deleted you will then be able to add a new/different vesting schedule.
Delete schedule: This option will completely delete the specific vesting schedule you created.
Deactivate schedule: This option enables the vesting schedule to remain active for those grants/people already assigned to it, but will not be available as an option (or appear on the drop down list), when assigning new vesting schedules for future grants.
Duplicate schedule: This option recreates the same vesting schedule. This is useful if you would like a similar vesting schedule with minor changes.
Congratulations, you now know how to set up and manage vesting schedules! The next step is to assign employees to the vesting schedule within an equity table. Click here for instructions on how to set up an equity table.