What is it:
Forfeiture is the loss of an unvested award, or an unvested portion of an award. Forfeiture occurs when the condition required for vesting (most often continued employment through a specific date) is not met.
Why does it matter:
Forfeiture of unvested awards is one of the major considerations when evaluating an opportunity to change jobs. Understanding forfeiture lets you calculate exactly what you would leave on the table if you departed on a given date. A sign-on bonus (cash) or sign-on award (equity) is sometimes designed, in whole or in part, to offset what you would forfeit by departing.
What do people most often get wrong:
People often underestimate how much value is actually at risk, since a large unvested balance can look like money already earned. Until each tranche actually vests, it remains fully forfeitable, and departure even one day before a vesting date forfeits that entire tranche.