What vesting schedule should employee options have?
By SuLe · Updated 10 July 2026
The common UK pattern for employee options is four-year vesting with a one-year cliff, vesting monthly after the cliff — and, very often, options exercisable only on an exit. Vesting ties the reward to staying; the exit-only feature keeps leavers off the share register. Both are market conventions you can adapt, not legal rules.
Key facts
- The typical schedule is four years with a one-year cliff, then monthly vesting for the remaining three years.
- The cliff means nothing vests before month 12; a quarter vests at the cliff, the rest month by month.
- UK startups commonly make options exercisable only on an exit, to keep the cap table clean.
- Unvested options normally lapse on leaving; vested options follow the scheme's leaver rules.
- Acceleration on an acquisition (single- or double-trigger) should be designed deliberately, as acquirers scrutinise it.
What vesting schedule do employee options usually have?
The default most UK startups reach for is four-year vesting with a one-year cliff, then monthly. It mirrors founder vesting and is what investors and experienced hires expect to see.
Nothing vests in the first year. At the twelve-month cliff, 25% vests in one go, and the remaining 75% then vests in equal monthly instalments to month 48.
It is a convention, not a statutory requirement, so you can vary the length, the cliff and the cadence. But departing far from the norm invites questions, so most founders keep the shape and tune the numbers. [More: What is a vesting cliff?]
Why have a cliff?
Because early hires do not always work out, and you do not want a three-month leaver holding equity forever. The cliff is a probation for options: leave before month 12 and nothing has vested, so nothing is kept.
Cross the cliff and the first quarter vests at once, recognising the year served. From there, monthly vesting keeps things fair — someone leaving at month 20 keeps what they earned to month 20, no more.
Without a cliff, an employee who leaves after a few weeks could walk away with a small slice of vested equity, which is exactly the outcome the cliff exists to prevent.
Should options be exercisable early or only on exit?
This is the other big design choice, and UK practice leans towards exit-only. An exit-only option can be exercised only on a sale or listing, so the employee never becomes a shareholder until there is cash to pay for the shares and to cover any tax.
The benefit is a clean cap table: leavers with unexercised options simply drop away, and you avoid ex-employees sitting on the register. The downside is less flexibility for employees, who cannot exercise and hold early.
The alternative — exercisable as options vest — gives employees more control but scatters small shareholdings across former staff, which can complicate later rounds. [More: What happens to share options when an employee leaves?]
What happens to vesting when someone leaves?
Unvested options normally lapse on the day someone leaves — the point of vesting is that unearned equity goes back. The vested portion is where leaver status matters.
Depending on the scheme rules, vested options may lapse, stay exercisable for a short window, or be dealt with at the board's discretion. A common window is 90 days, which also aligns with the EMI rule requiring exercise within 90 days of a disqualifying event to keep the tax treatment.
Spell this out in the scheme rules, tied to good and bad leaver definitions, so nobody is negotiating it after the fact. [More: What are good leaver and bad leaver provisions?]
| Point in a 4-year, 1-year-cliff schedule | Vested |
|---|---|
| Month 6 | 0% |
| Month 12 (cliff) | 25% |
| Month 24 | 50% |
| Month 36 | 75% |
| Month 48 | 100% |
The schedule above is common market practice; the exact shape is yours to set in the scheme rules.
Can I use milestone or accelerated vesting?
Yes, alongside or instead of time-based vesting. Some roles suit milestone vesting — options that vest on hitting a target — though time-based schedules dominate because they are simpler and harder to argue about.
Acceleration deals with what happens on an acquisition. Single-trigger acceleration vests options on the sale itself; double-trigger vests them only if the employee is also let go after the sale. Double-trigger is often preferred because it keeps the team incentivised to stay through the transition.
Acquirers examine acceleration closely, since it changes both the price and who remains, so design it into the scheme deliberately rather than bolting it on at exit.
Worked example
Kwame runs Signal Loop, a cybersecurity startup, and grants his first sales lead an EMI option over 24,000 shares on the standard four-year, one-year-cliff, monthly schedule, exercisable only on an exit.
At the twelve-month cliff, 6,000 options (25%) vest. The sales lead stays and leaves amicably at month 30, by which point 30/48ths have vested — 15,000 options. The remaining 9,000 unvested options lapse.
As a good leaver under the scheme rules, the sales lead's 15,000 vested options are kept but, being exit-only, cannot be exercised until Signal Loop is sold. When a sale completes a year later, they exercise and sell into the deal, and because the shares are EMI, the gain is taxed as a capital gain.
Where founders go wrong
Dropping the cliff to look generous.
Without a one-year cliff, a very early leaver keeps vested equity — the cliff exists precisely to stop that.Not deciding exit-only vs exercisable early.
Leaving it vague scatters small shareholdings across ex-staff and complicates your next round.Silence on leaver treatment.
If the rules do not say what happens to vested options on leaving, you will negotiate it under pressure — define it up front.Bolting on acceleration at exit.
Acquirers scrutinise acceleration; design single- or double-trigger into the scheme, not into the deal.
Related questions
What is the standard vesting schedule for employee options?
The common UK pattern is four-year vesting with a one-year cliff, then monthly vesting for the remaining three years. Nothing vests before the twelve-month cliff; a quarter vests at it; the rest builds up month by month. It is a convention, not a legal requirement. [More: What is a vesting cliff?]
What is a vesting cliff and why use one?
A cliff is an initial period during which nothing vests — usually one year. Leave before it and the employee keeps no options; stay past it and the first tranche (typically 25%) vests at once. It filters out very early leavers so they never carry any equity. [More: What is a vesting cliff?]
Should options be exercisable straight away or only on exit?
Many UK startups use exit-only options, exercisable only on a sale or listing. That keeps leavers off the share register and avoids employees paying to exercise into illiquid shares. The alternative — exercisable as they vest — gives employees flexibility but complicates the cap table. [More: What happens to share options when an employee leaves?]
What happens to unvested options when someone leaves?
Unvested options normally lapse on leaving. Vested options are treated according to the scheme rules — they may lapse, stay exercisable for a short window (often 90 days, aligning with EMI disqualifying-event rules), or be dealt with at board discretion depending on leaver status. [More: What are good leaver and bad leaver provisions?]
Can I accelerate vesting on an acquisition?
Yes, if the scheme provides for it. "Single-trigger" acceleration vests options on a sale; "double-trigger" vests them only if the employee is also let go after the sale. Acquirers scrutinise acceleration closely because it affects the price and the retained team, so design it deliberately. [More: What happens to employee options when a startup is acquired?]
A vesting schedule is a retention tool and a cap-table discipline at once — and the details, from the cliff to exit-only exercise to acceleration, decide who keeps what when people come and go. A SuLe solicitor can draft scheme rules that fit your plans and your future round. Book a free call about your option scheme and set vesting terms you will not have to unpick later.
Keep reading: What is a vesting cliff? · What happens to share options when an employee leaves? · What are good leaver and bad leaver provisions? · How big should a startup option pool be? · What is an EMI share option scheme? · What happens to employee options when a startup is acquired?
Primary sources: GOV.UK — Enterprise Management Incentives (EMIs)
