Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Tutoring
  • Home
  • Law, Transactions, & Risk Management
  • Business Transactions, Antitrust, & Securities Law

Vesting Schedule - Explained

What is a Vesting Schedule?

Written by Jason Gordon

Updated at April 15th, 2022

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

Table of Contents

What is a Vesting Schedule?How does a Vesting Schedule Work? Vesting and Employee Retention Vesting and Inheritance Vesting and Startup Companies Academic Research on Vesting Schedule

What is a Vesting Schedule?

Vesting Schedule describes an incentive program or retirement plan organized by an employer but which can only be accessed by an employed when it is fully vested. Legally, vesting Schedule describes a case in which an employer gives or an employees earns the right to claim a future payment or asset. 

When an incentive or retirement plan is fully vested, the employer gives the employee full ownership of certain funds or assets. Vesting Schedule can also be used in inheritance law or real estate, it describes the non-forfeitable rights given to an individual over a property or inheritance.

Back To: BUSINESS LAW

How does a Vesting Schedule Work? 

Aside from being used to describe vesting between an employer and employee, vesting Schedule is a term that can be applied in certain industries. In the context of incentive plans and retirement benefits, vesting gives rights stock incentives or retirement plans provided by the employer. In most cases, employers vest employees who merit such plans or incentives. 

This serves as encouragement for employees to remain with the organization and also remain committed to their duties. Vesting Schedule is a timetable that determines when an individual gets full ownership of assets of benefits vested by an employer. So, until that time is reached, the employee must stay with the organization. 

Vesting and Employee Retention 

Oftentimes, vestings are strategically done by employers to retain employees with immense skills who have proven to be of impact to the organization. Vesting is an employee-retention tool used by many employers. This is an enticing method that proves to be effective for retaining skillful employees. 

For instance, a vesting Schedule might state that an employee is entitled to 50 units as bonus at the end of the second year and in consecutive years. If the employee leaves after the second year, the 50 units to be collected in consecutive years will be forfeited. So as to fully enjoy vesting Schedule, employees are motivated to remain with an organization for longer periods of time. 

Vesting and Inheritance 

Vesting Schedule is also applicable to inheritance. This is exercised by a person who wishes to vest an inheritance to an offspring or another individual. A waiting period must be set in the vesting schedule, for inheritance, it is often after the death of the party who vested the inheritance (property, assets, funds and others). The waiting period stipulated in the vesting schedule helps to minimize conflicts over the inheritance. 

Vesting and Startup Companies 

In a bid to retain qualified employees and encourage their loyalty, startup companies engage in vesting schedule. These companies vest grants, benefits or incentive plans to their employees, board members, service providers and others. A success-oriented startup company might need this to retain competent service providers and employees. The common vesting period peculiar to startup companies is between 3 and 5 years.

Back to: Business Transactions


vesting schedule vesting

Was this article helpful?

Yes
No

Related Articles

  • Bailout (Company) - Explained
  • Sweat Equity - Explained
  • Privitization - Explained
  • Cliff Vesting - Explained



©2011-2023. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand