How does fixed equity work?

Fixed equity follows the traditional vesting schedule of stock options where a fixed amount of equity vests over a period of time. The vesting schedule usually includes a “cliff” period and a monthly vesting period. When the cliff period is reached or achieved, the awardee is deemed qualified for the equity award and will start receiving equity according to the plan.

The worker also typically receives the first tranche of equity (which is usually a percentage of the entire award) when the cliff is reached or achieved. It is then followed by a monthly vesting period where the worker is awarded a fixed amount of equity over time until the full equity award has vested.

A common example is a four-year fixed equity plan with a one-year cliff. Let’s say the plan covers 10,000 shares and the shares that will vest upon reaching the cliff is 10%. This means that 1000 shares will vest one year after the worker is awarded the equity plan. After that, the remaining 9000 shares will vest monthly, usually at a uniform rate (in this example, 250 shares per month) over the remaining three years of the plan (i.e., from the 12th month to the 48th month).

It works the same way with Upstock’s RSUs except for its double-trigger vesting mechanism.