Cliff vesting is a method used in retirement plans and employee stock option plans where employees become fully vested at a specific point in time, rather than gradually over time. This means that they will be entitled to their full benefits or stock options only after a predetermined period has passed, usually a year or several years, which is referred to as the “cliff”.
In the world of employee benefits and retirement plans, understanding the concept of graded vesting is crucial. Graded vesting, also known as graduated vesting, is a method where employees earn the right to their employer-contributed benefits gradually over time, rather than all at once. This strategy is often implemented to retain employees for a longer period and to foster loyalty and dedication within the workforce. In this section, we will delve deep into the nuances of graded vesting, tracing its roots and its significant role in modern employee compensation structures.