What is a vesting period??
In: Economics
“If you come work for us, we’ll give you 10,000 shares of our stock. BUT you have to wait as the shares are slowly delivered to you. If you leave before it’s done, you don’t get the leftovers.”
That waiting time is your vesting period.
Many companies have a vesting period where they give you either stock or retirement benefits that don’t fully kick in at first. It’s a way to reduce turnover.
So some companies may give you 20% of the benefit each year so after 5 years you get 100%of it.
That’s how my company works.
its a lockup period before the benefits are yours to keep you at the current employer
“we’ll match 5% of your retirement savings; but there is a 3 year vesting period”. if you leave before 3 years you owe back all of their contributions
It’s a time where you earn the right to portion of something granted… you most commonly see it related to stock grants or stock option grants with a company, or with 401k matches, etc.
So say you join a compnay and they grant you 900 shares of company stock with a 3 year vesting period. That typically means that after one year, you’d be able to claim 1/3, or 300 shares. After the second year of employment, 300 more. And if you stay for 3 years then you’d be able to get the final 300 shares.
I tell you that I’m giving you my entire stamp collection. But only 10% of it vests every year. So really I hold onto my stamp collection, but I’ve promised to give you 10% of it every year.
In the same way, if you work for a company, and they give you 1,000 shares vested 25% every year, then really they’ve just promised to give you 250 shares every year for 4 years.
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