Glossary / Cliff Vesting
Cliff vesting is a type of vesting schedule that allows employees to become fully vested in their employer-provided benefits or retirement plans after a certain period of time. Under cliff vesting, employees do not gradually become vested over time, but instead become fully vested all at once after a specific milestone is reached. For example, a company may have a cliff vesting schedule that requires employees to work for the company for three years before becoming fully vested in their employer-matched retirement plan. If an employee leaves the company before the three-year mark, they would not be entitled to any of the employer contributions to their retirement plan. However, if they stay with the company for three years, they would become fully vested and would be entitled to the full amount of the employer contributions. Cliff vesting schedules are often used as a way for employers to incentivize employee retention. By requiring employees to stay with the company for a certain period of time before becoming fully vested, employers hope to encourage loyalty and reduce turnover.