Performance Based Vesting in Grants

Performance Based Vesting in Grants

Performance-based vesting links employee equity awards options to the achievement of specific targets, such as individual performance goals, departmental objectives, or corporate financial milestones. This means that instead of adhering to a fixed vesting schedule, stock options vest only upon meeting predefined performance criteria within a specified period.

Why Companies Use Performance-Based Vesting:

• Allows employees to participate directly in the company's growth.
• Safeguards company interests by setting stringent vesting conditions.
• Helps attract and retain high-performing employees.
• Encourages employees to maintain a high standard of collective performance.

Example: An employee holds 1000 stock options. If the company achieves 10% growth in a quarter, 10% of the vested options for eligible employees (100 options in this case) are released immediately.

You can associate performance-based vesting with an award either during its creation or by editing an existing grant.

To Create a Performance Condition Template:

1. Navigate to Settings in the left menu, then go to Configurations.
2. Select Equity Award - Grant configurations, then choose Performance Condition Templates, and finally click Add New Template.
3. In the Create Performance Condition Template dialog box, enter a Condition Name.
4. Select the Condition Type. Qapita supports three types:

5. Enter the Performance Condition Details.
6. Specify the Value for Minimum Payout % (0-100) for the performance criteria.
7. Specify the Value for Maximum Payout % (0.01-100).
8. Click Create. The new template will be available in the Condition dropdown for associating with grants.

To Add Performance Condition Vesting While Creating a Grant:

1. Click Equity Awards on the left menu, then select Grants.
2. Click Grant Awards and choose any instrument (e.g., Option Awards).
3. On the Create Grant screen, click Vesting Schedule.
4. Generate the Vesting Schedule using a Vesting Template.
5. Click the edit icon () to modify the Vesting Schedule.
6. In the dialog box, click Proceed. This converts the schedule to a manually updated one.
7. Double-click the vesting record you wish to edit.
8. Click the Condition field for the tranche and select the desired Performance Condition.
9. Click Update in the Edit Vesting Schedule to save changes.

Note: For performance-based vesting to become effective, it must be recognized by management/admin. Refer to the specific guide on recognizing Performance Conditions.

To Add Performance Condition Vesting While Editing an Award:

1. Click Equity Awards in the left menu and select Grants. 

2. Locate and select the specific grant or use the search function.
3. Click the menu icon (⋮) corresponding to the stakeholder and select Edit Award.
4. On being redirected to Vesting Parameters, follow steps 5 through 9 from the "To Add Performance Condition Vesting While Creating a Grant" section above.