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4 Year Vesting with a 1 Year Cliff: What It Really Means for You
Gibran Le
1 September 2025
The phrase “4-year vesting with a 1-year cliff” appears in almost every equity offer letter, yet few employees fully understand what it means—or how it affects them if they leave early or the company changes course.
The Structure Explained
A 4-year vesting schedule means your equity vests gradually over four years. The 1-year cliff means nothing vests until you complete 12 months of service. After that, a portion (usually 25 percent) vests, and the rest vests monthly or quarterly thereafter.
For example, if you receive 10,000 RSUs with a 4-year vesting schedule and a 1-year cliff, you receive 2,500 shares after year one, then roughly 208 shares each month for the next 36 months.
Why the Cliff Exists
The cliff protects the company from issuing equity to employees who leave early and ensures alignment. It is not inherently unfair—but it is a risk if you are unsure about your fit, the company’s stability, or future funding.
Hidden Implications
If you leave before the cliff, you forfeit all unvested shares. This can be a painful surprise for employees who exit at month eleven. It also means any layoff or reorganization before that date wipes out your equity completely.
What You Can Negotiate
You can request:
Shorter cliffs (6 months is increasingly common)
Partial vesting on termination without cause
Acceleration if the company is acquired before the cliff ends
Bottom Line
Vesting terms seem standard but have real financial impact. Before signing, model your outcomes under multiple scenarios. Your vesting schedule can determine whether your equity becomes real wealth or stays on paper.