ESOP vesting
Share options are earned over time rather than handed over on day one. Put in the grant and the schedule to see what has actually been earned at any month, and what it is worth if the company sells.
Skip to the calculatorVesting
Being granted options does not mean owning them yet. They are released gradually, usually over four years, and that release is called vesting. Most plans start with a cliff: leave before that date and you get nothing at all, reach it and a whole chunk lands at once. After the cliff the rest arrives steadily, month by month.
The number that matters is not the grant, it is what has vested on the day you leave, or the day the company sells. For real options there is also a strike price to pay, and an option is worth nothing if the strike is above the share price.
Worked example
48,000 options over four years with a one-year cliff is 1,000 a month. At eleven months you have nothing. At twelve months you have 12,000. At thirteen months, 13,000. If the company sells at €2.00 a share when 24,000 have vested, that is €48,000 gross, less 24,000 × your strike to exercise.
How to calculate vested equity, cliffs and acceleration
Vested, Month 48
48,000At the cliff12,000
Before tax, this reaches you€72,000
Vests
Plan type
Acceleration on a sale
Currency
- Vested100.0%
Vested48,000
Unvested0
Gross value€96,000
Cost to exercise€24,000
| Month | Vested | This period | Ownership |
|---|---|---|---|
| 0 | 0 | n/a | 0% |
| 3 | 0 | n/a | 0% |
| 6 | 0 | n/a | 0% |
| 9 | 0 | n/a | 0% |
| 12At the cliff | 12,000 | 12,000 | 25% |
| 15 | 15,000 | 1,000 | 31% |
| 18 | 18,000 | 1,000 | 38% |
| 21 | 21,000 | 1,000 | 44% |
| 24 | 24,000 | 1,000 | 50% |
| 27 | 27,000 | 1,000 | 56% |
| 30 | 30,000 | 1,000 | 63% |
| 33 | 33,000 | 1,000 | 69% |
| 36 | 36,000 | 1,000 | 75% |
| 39 | 39,000 | 1,000 | 81% |
| 42 | 42,000 | 1,000 | 88% |
| 45 | 45,000 | 1,000 | 94% |
| 48 | 48,000 | 1,000 | 100% |
How this is calculated
- Before the cliff, nothing is vested.
- On and after the cliff, vested = grant × months elapsed ÷ total months, capped at the grant.
- Quarterly and annual schedules only release on period boundaries; the cliff still releases in full on its own date.
- Figures are floored to whole units cumulatively, so the schedule never overshoots and lands exactly on the grant.
- Net value at exit = vested × share price, less vested × strike. An option worth less than its strike is worth nothing, not a negative.
- VSOP and phantom shares are cash-settled: no shares are issued and there is nothing to exercise.
What this model leaves out
- Enter a grant date and the schedule works in real dates. A grant dated the 31st vests on the last day of any shorter month, which is what option plans normally say.
- Acceleration is modelled as a single event, not as a notice period or a partial year of extra credit measured in time.
- Values are before income tax and social contributions, which in most of Europe is a large part of the difference between this figure and what reaches you.
Common questions
- What is a vesting cliff?
- A cliff is a period at the start of a grant during which nothing vests at all, followed by a single moment when the whole of that period vests at once. The standard shape is four years with a one year cliff: leave after eleven months and you have nothing, stay to month twelve and 25% vests on that day. It exists to make the first year a genuine commitment rather than a trial with equity attached. After the cliff the rest usually accrues monthly.
- What is the difference between ESOP and VSOP?
- An ESOP grants real options over real shares: exercise them and you become a shareholder. A VSOP grants a contractual right to a cash payment calculated as though you held those shares, and you never become a shareholder at all. The VSOP exists largely because issuing real shares to employees in a German GmbH requires a notary for each transfer, which is slow and expensive at any headcount. The economics can be made to look similar; the tax treatment and the moment tax falls due are not, and that difference is the reason to know which one you have.
- What is double trigger acceleration?
- Double trigger means two things must happen before unvested equity vests early: the company is acquired, and you are terminated without cause within some window after it. Single trigger vests on the acquisition alone. Double trigger is much more common in negotiated grants because a buyer wants the team to stay, and equity that all vests on signing removes the reason to. From an employee's side single trigger is better and double trigger is what you will usually be offered.
- What is a strike price and why does it matter?
- The strike is what you pay per share to convert an option into a share, and it is fixed when the option is granted. Your gain is the share price at exit minus the strike, multiplied by the number of options, so a low strike is worth real money. It also means an option is worth nothing if the company sells below the strike, which is not a rare outcome. Bittern's exit waterfall models this properly: options are exercised only when they are in the money, and the holder is paid net of the strike.
- What happens to my options if I leave the company?
- Unvested options are lost. Vested options usually have to be exercised within an exercise window after you leave, commonly 90 days, and anything not exercised in that window is lost too. The window is the part people are caught by, because exercising means finding the cash for the strike price on shares you cannot sell, and in some jurisdictions paying tax on a paper gain at the same time. Ask what the window is before you take the grant, not on your last day.
- How do I calculate how much of my grant has vested?
- Take the grant, check whether you have passed the cliff, and if you have, count the vesting periods elapsed as a fraction of the total. On 48,000 options over four years with a one year cliff, nothing has vested at month eleven, 12,000 vest at month twelve, and 1,000 accrue each month after that, so month eighteen stands at 18,000. The tool above does this against real calendar dates rather than idealised months, which matters because a grant dated the 31st does not vest cleanly in February.
Terms on this page
- Double trigger acceleration Unvested equity vests early only if two things happen: the company is acquired and you are then let go.