RSU Vesting Schedules Explained: What Your Employment Agreement Says About Your Equity

RSUs are now the standard equity vehicle at large public tech companies, and they're increasingly common at late-stage private companies approaching an IPO. They seem straightforward — you get a certain number of shares that vest over time — but the details in your employment agreement and grant documents govern enormous amounts of money. Here's what you actually need to understand.

What RSUs Are (and Aren't)

Restricted Stock Units are promises to deliver shares (or cash equivalent in some plans) at a future date, contingent on you remaining employed through specified vesting dates. Unlike stock options, you don't buy anything — you just wait for the vesting dates to arrive, and then you receive shares (which are taxed as ordinary income in the year you receive them).

RSUs are not the same as stock options. With options, you receive the right to buy shares at a fixed price (the strike price). If the company's value increases, you profit; if it doesn't, your options may be worthless. With RSUs, you receive shares regardless of whether the stock price increases — but you only receive them if you're still employed on the vesting date (unless your agreement provides otherwise).

The grant notice or award agreement is the document that controls your RSU terms. Your offer letter may summarize the grant, but the actual legal terms are in the equity plan documents and the specific grant notice.

The Standard 4-Year/1-Year Cliff

Most public tech companies use some version of a four-year vesting schedule. The most common structure: a one-year cliff (nothing vests until you complete your first year), followed by either monthly or quarterly vesting of the remaining shares over the next three years.

With a one-year cliff and quarterly vesting after: if you leave at month 11, you receive nothing. If you leave at month 13, you've received 25% of your grant plus one quarter's worth of the remaining 75%. The cliff creates a strong incentive to stay through the first anniversary.

Monthly vesting after the cliff creates smoother income but is more common at smaller companies. Quarterly vesting (every three months after the cliff) is standard at most large tech companies. Annual vesting (full tranches once a year) is common at some companies and creates larger, less frequent vest events.

Front-Loaded vs Back-Loaded Schedules

Not all four-year schedules vest linearly. Two notable structures deviate significantly from the standard 25%/year model:

Front-loaded schedules: Some companies vest a higher percentage in years one and two, tapering off in years three and four. This delivers more equity sooner and reduces the "golden handcuff" effect in later years.

Back-loaded schedules: Amazon is the most prominent example, with a schedule that has historically followed approximately a 5%/15%/40%/40% structure — meaning you receive very little in years one and two, with the majority of your grant arriving in years three and four. The economic effect is significant: after two years at Amazon, you've received only 20% of your initial grant. The back-loaded structure is often combined with signing bonuses to offset the low near-term equity income.

Understanding which type of schedule applies to you is essential for modeling the economic implications of staying versus leaving at different points in your four-year cycle.

What Happens When You Leave

This is where most people get surprised: when you leave a company — for any reason — your unvested RSUs are almost universally forfeited. There is no default rule that vests remaining RSUs on termination. Unless your agreement or equity plan specifically provides for accelerated vesting (see below), unvested RSUs disappear the moment your employment ends.

The practical implication: leaving three months before a major vesting event is a very different financial decision than leaving three months after one. Knowing your vesting schedule precisely — not just the general structure, but the specific dates — is important for timing career decisions.

There is no concept of "earned but unpaid" for unvested RSUs in the way that applies to salary. They're contingent grants, and the contingency (continued employment) must be satisfied on the vesting date.

Acceleration Clauses: Single and Double Trigger

Some equity plans and employment agreements include acceleration provisions that cause unvested RSUs to vest early in certain circumstances. Two types:

Single-trigger acceleration: Vesting accelerates automatically upon a triggering event — typically an acquisition of the company. If the company is acquired, all your unvested RSUs vest immediately. This is relatively rare at large public companies (an acquisition is unlikely) but more relevant at pre-IPO companies.

Double-trigger acceleration: Requires two events to trigger acceleration — typically (1) an acquisition AND (2) termination without cause or resignation for good reason within a specified period after the acquisition. This is more common and more balanced — the employee benefits if they're displaced by the acquisition, but not simply because an acquisition occurred.

If you're joining a pre-IPO company, the acceleration provisions in your equity documents are particularly important. Check whether your agreement includes double-trigger acceleration and what events qualify.

What to Look For in Your Agreement

Key items to verify in your equity documents:

• Share count: The actual number of units granted, confirmed in the grant notice.
• Grant date: Important for confirming the vesting schedule start date.
• Vesting schedule: The specific dates on which shares vest.
• Settlement: Do vested RSUs automatically settle as shares, or is there a separate settlement election?
• Termination treatment: Exactly what happens to unvested RSUs if you resign vs. are terminated without cause vs. terminated for cause?
• Acceleration provisions: Any change-of-control or termination-triggered acceleration?

The Bottom Line

RSU vesting schedules can mean hundreds of thousands of dollars of difference based on when you leave, what triggers acceleration, and what the forfeiture rules are on termination. Before you accept an offer or make a career move, paste your equity grant documents and employment agreement into dott.legal for a free AI risk analysis. For high-value equity situations or complex vesting terms, attorney-validated review is $349 with 24-hour turnaround.