๐ ๐ช๐ต๐ฎ๐ ๐๐ฟ๐ฒ ๐ฉ๐ฒ๐๐๐ฒ๐ฑ ๐ข๐ฝ๐๐ถ๐ผ๐ป๐ ๐ฎ๐ป๐ฑ ๐ฆ๐ฐ๐ต๐ฒ๐ฑ๐๐น๐ฒ๐? ๐
Vesting is a cornerstone of equity grants, offering employees a stake in the companyโs success. But what exactly does this mean?
Vested Stock Options: Before employees can cash in on their stock options, these must vest. Vesting is the process where employees earn ownership of their stock over time or upon hitting company milestones.
In India: ESOPs (Employee Stock Ownership Plans) are exclusive to full-time employees, with a mandatory one-year cliff before any vesting begins. Advisors and part-time employees receive non-statutory stock options instead.
Vesting Schedules: There are three main types:
Uniform Vesting: Employees receive a set percentage of their options over a period. For example, 10,000 options with 25% vesting annually over four years mean 2,500 options vest each year.
Bullet Vesting: All options vest at once after approval, ideal for catching up on delayed grants.
Performance-Based Vesting: Tied to individual or company performance, ensuring employees stay motivated to meet predetermined goals.
For those granted options, it’s crucial to understand your company’s ESOP scheme, rights, and restrictions. Founders, ensure all paperwork is in place, as options canโt vest without proper documentation and approvals.
Understanding vesting is vital for maximizing your equity benefits and aligning with your companyโs growth. ๐
