Vesting — What is it? Rights Accrual Schedule

Quick Answer

Vesting is the process of gradually acquiring rights to equity such as stock options or RSU, governed by a vesting schedule that determines when each portion unlocks. The standard model is 4 years with a 1-year cliff: nothing vests for the first 12 months, then 25% unlocks at once and roughly 1/48 monthly thereafter until 100% after four years. A cliff protects the company from early leavers, while vested options stay yours (often a 90-day exercise window) and unvested options are forfeited if you leave.

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Definition

Vesting is the process of gradually acquiring rights to assets (usually stock options or RSU) by an employee. A vesting schedule determines when and how much equity "unlocks" — becomes your property.

Standard vesting schedule

The most common model is 4 years with a 1-year cliff:

• Cliff (1 year) — for the first year you get nothing. After 12 months, 25% of the total unlocks
• Months 13-48 — each month an additional 1/48 (about 2.08%) unlocks
• After 4 years — you have 100% of the granted options/shares

Example: You received 12,000 options with 4-year vesting and a 1-year cliff:

• After 1 year: 3,000 options
• After 2 years: 6,000 options
• After 3 years: 9,000 options
• After 4 years: 12,000 options

Types of vesting

Time-based vesting

Most popular — options unlock over time. The only condition: you work at the company.

Milestone-based vesting

Options unlock after achieving specific goals (e.g., company revenue, project completion). Common in early-stage startups.

Reverse vesting

You get all shares immediately, but the company can buy them back (at a low price) if you leave before the vesting period ends. Mainly used for founders.

Cliff — why is it there?

The cliff protects the company from situations where someone leaves after 2 months with part of the equity. A one-year cliff means: if you don't work for a year — you get nothing.

What happens when you leave?

• Vested options — They're yours. Usually you have 90 days to exercise them
• Unvested options — You lose them. They return to the company pool
• Termination without cause — some agreements provide for vesting acceleration
• Change of control (acquisition) — single trigger or double trigger acceleration

Vesting acceleration

• Single trigger — all vesting accelerates upon company acquisition
• Double trigger — vesting accelerates if the company is acquired AND the employee is terminated

Vesting in Poland

In Polish startups and tech companies, vesting is becoming standard. Most commonly used structures:

• ESOP (Employee Stock Option Plan) in a spółka z o.o. or S.A.
• Subscription warrants (warranty subskrypcyjne)
• Option agreements (phantom shares — virtual equity)

For Polish employees, it's important to understand tax implications. When you exercise options or receive shares, you may need to pay PIT (personal income tax) on the difference between exercise price and fair market value. Consider consulting with a Polish tax advisor who understands equity compensation.

Companies often structure vesting to optimize for Polish tax law, sometimes using deferred tax models or specific timing around ZUS (social security) contributions.

How Freenance can help

Freenance allows you to track your vesting schedule and see how much equity you have already unlocked and how much is waiting. This helps you plan your finances and make job change decisions with full awareness of what's at stake.

When tracking your equity compensation in PLN terms, Freenance helps you understand the true value of your vested options, accounting for currency fluctuations if your company is valued in USD or EUR.

👉 Monitor your vesting with Freenance — freenance.io

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FAQ

What is a one-year cliff?

A one-year cliff means none of your granted equity vests during the first 12 months of employment. If you leave or are terminated before the cliff date, you walk away with zero shares. Once you cross the cliff, a chunk (usually 25% on a four-year schedule) vests at once, and the remainder typically vests monthly or quarterly afterwards.

Why is four-year vesting the standard?

Four years emerged as a Silicon Valley convention because it balances meaningful retention with realistic career horizons in fast-moving startups. It gives the company enough runway to benefit from the employee's contribution while still rewarding long-term commitment. Some companies experiment with longer (5-6 year) schedules or back-weighted vesting, but 4 years with a 1-year cliff remains the most common.

What happens to unvested options if I leave?

Unvested options or shares are typically forfeited and returned to the company's equity pool. Vested options usually remain yours, but most plans require you to exercise them within a defined post-termination exercise window (often 90 days). Some modern plans extend that window to several years — always check your specific grant agreement.

What is vesting acceleration?

Acceleration provisions cause unvested equity to vest earlier than scheduled, usually triggered by an acquisition or other corporate event. "Single trigger" accelerates on the acquisition itself, while "double trigger" requires both an acquisition and a subsequent involuntary termination of the employee. These clauses are heavily negotiated, especially for founders and senior hires.

How is vesting taxed in Poland?

Polish tax treatment of equity compensation is complex and depends on the instrument (ISOs equivalent, RSUs, warrants, phantom shares) and timing of taxable events. Typical taxable moments include exercise of options, share delivery from RSUs, and ultimate sale of shares. Rules around PIT, ZUS and the 19% capital gains tax change periodically, so consulting a Polish tax advisor familiar with equity compensation is strongly recommended. This is informational content, not tax advice.