Graded Vesting

See: Vesting.

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Also, in finance, the term refers to how an employee accumulates retirement benefits.

There are fundamentally two methods for employees to earn retirement bennies at a company: cliff vesting and graded vesting.

Cliff vesting means all the benefits accrue suddenly when an employee reaches certain criteria. An employee becomes eligible for pension benefits when they've served 20 years with the company. At 19 years, 364 days of service, the employee is entitled to no benefits. Zero. Nothing. At exactly 20 years, they can retire at full benefits. Sudden, like driving off a cliff.

Graded vesting is like driving up a ramp. As the employee gathers tenure at the company, the amount of potential benefits increase. So if someone retires after 15 years, they still get something. Not as much as 20 years, but the 15 years has earned them some benefits.

Many programs have combinations between cliff and graded structures. So an employee has to reach 20 years to get any benefits, but after reaching that threshold, the amount they receive in retirement increases with the amount of service they accumulate. A 19-year veteran would get nothing, but a 25-year veteran would get more than someone with 21 years of service.