What is it:
Cliff vesting is a structure in which nothing vests for an extended period, then a portion or the entirety of the award vests all at once on a single date. This is different from graded vesting, where the award vests through a series of regular installments without a comparable waiting period beforehand. Cliff vesting can govern an award's entire schedule (for example, 100% vesting after four years with nothing vesting in the interim), or it can govern only the award's first tranche, commonly a one-year cliff, ahead of a separate graded schedule for the remainder.
Why does it matter:
This structure determines your entire outcome up to the cliff date, since a departure at any point before it, even the day before, forfeits everything that would have vested on that date. Understanding whether your own schedule is a full cliff or only a partial one changes how much is genuinely at stake at any given point in your tenure.
What do people most often get wrong:
People often read cliff vesting as a sign the company is being cheap or playing games with their compensation. In reality, it's a deliberate philosophical choice aimed at a specific goal: keeping the executive for the entire length of the grant. While a minority of companies use cliff vesting, it is more than you would expect. They are not few and far between and cliff vesting is a legitimate design choice.