Cliff Vesting
Private Equity glossary · Private Equity Fundamentals
Definition
A vesting schedule in which 100% of an award vests after a defined service period (e.g., one-year cliff in MIPs).
Cliff Vesting in plain English
Imagine your boss promises you a bonus, but only if you stick around for a full year — quit at month eleven and you get nothing; hit the one-year mark and the whole bonus lands in your lap at once. That's cliff vesting: instead of your reward dribbling in bit by bit, it's all-or-nothing at a single 'cliff' date. Companies use it to make sure people actually stay and contribute before the ownership or bonus becomes truly theirs. (In private equity, MIPs — management incentive plans — often work this way to keep key managers committed.)
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