If you’re running a UK startup or scaleup and have implemented (or are thinking about implementing) an EMI Scheme, one of the most important decisions you’ll make is the type of scheme you’re going to implement. Broadly there are two most common types: (1) exit only schemes, where the options can only be exercised and converted to shares at an exit, and (2) time-based vesting schemes, where the right to exercise share options and convert them into actual shares accrues over time.

For those startups and scaleups opting for the second ‘option’ (time-based vesting), a key decision to make is the length of the vesting period over which the options accrue, and the cliff period before any options vest. From the employee’s perspective, the vesting structure determines what they might get and when they get it. Given that the EMI Scheme is supposed to be a form of incentive, it’s important that the vesting plan is structured as being balanced, geared towards wider company goals and well…incentivising!

At Accelerate Law, we support both early-stage and scaling companies with EMI Schemes end-to-end. One thing we see repeatedly is founders defaulting to the “market standard” vesting schedule without pausing to ask whether it actually fits their business, their hiring plans or their long-term cap table strategy.

Vesting is a powerful behavioural lever startups and scaleups can use across hiring, culture and more (it shapes early employee loyalty, performance, expectations and fairness). For that reason, we believe it merits a personalised decision on a case-by-case basis, based on individual circumstances and strategic direction.

What Founders Usually Choose, and Why It May Not Be Optimal

Most UK startups adopt the widely accepted structure:

1. 4-year vesting

2. 1-year cliff

3. Then monthly or quarterly vesting

This pattern has become so common that many founders assume it is actually required for EMI Schemes. It isn’t. It’s just a convention.

Under this structure, an employee who leaves after 14 or 18 months for example may walk away with a meaningful number of vested share options. For some businesses, this is perfectly acceptable. For others, particularly those with long product cycles or mission-critical early hires, this can create uncomfortable outcomes: numerous ex-employees on the cap table with a slice of equity earned relatively early in the journey.

We usually suggest that founders step back and examine whether the conventional model aligns with the company’s team stability and expected plans and time to exit. Usually this requires some scenario planning and asking direct questions, such as “if this person leaves in 18 months, do we accept that person having X number of shares in our company?”. The answer to this type of question can guide both the vesting plans and also the number of options that may be granted in the first place.

What alternatives are there to the standard 4 year vesting period with a 1 year cliff?

Adjusting the Cliff Period

The cliff is the minimum period someone must stay before earning any options. A 1-year cliff is typical, but not always right.

For example, some of the startups we advise choose an 18-24 month year cliff for early leadership roles where the cost of early churn is high. This creates a longer proof period and reduces the likelihood of equity being allocated to short-tenure employees.

Extending the Vesting Period

Similarly, the traditional 4-year vesting structure assumes a relatively standard growth trajectory. But not all companies operate on that timeline. In fact in some ways it feels more linked to typical employment timelines rather than the time it takes to actually grow and sell a company which is typically longer.

We regularly work with startups (particularly in deep tech, healthtech and regulated sectors) where 5-year vesting aligns far better with the complexity and duration of the build. In these contexts, extending vesting can be more motivating - employees understand the long-haul nature of the product/business and see vesting as part of that journey.

Role-Based Vesting Schedules

Another misconception is that an EMI Scheme must use one vesting structure for everyone.

In reality, your scheme can support different vesting rules for different categories of employees, provided the documents are drafted correctly. For example:

1. Senior hires may have 5-year vesting

2. Core early employees may have a 2-year cliff

3. Later hires may follow a standard 4-year vesting model

We help leadership teams design these layered structures where appropriate, ensuring compliance with EMI rules while preserving flexibility.

Hybrids, Penalties and Buybacks

If permitting standard vesting, what else can you do to offset the risks? Some options for commercial terms to incorporate in EMI schemes include:

1. Taking a hybrid approach - for example where some shares vest over time and others can only vest at an exit. In that way, companies can arguably get the best of both worlds.

2. Adding penalties for leaving before the end of the vesting schedule - for example, a company could add in an additional cliff, before which only a certain portion of vested options can be exercised.

3. Buyback provisions - a company could incorporate the right to buy back shares at market value at the time the options were exercised, meaning that this reduces the scope for a person leaving ‘early’ to benefit from the growth of the shares for a period in which they were no longer with the company. This can be more complex though as it requires a valuation process, but this may be helped if there had been a recent funding round to measure it.

Should Vesting Accelerate on an Exit?

Another common decision to make in designing an EMI Scheme is whether unvested options should accelerate on exit (i.e. they can be exercised, and the shares granted to the relevant individual, even though they haven’t vested).

Accelerated vesting can:

1. create strong alignment at the point of sale,

2. help newer employees still feel part of the outcome, and

3. simplify negotiations during due diligence.

But it also has potential drawbacks. For example, it may feel unfair to employees who have been with the company for longer.

In our experience, the most founder-friendly approach is to build in board discretion within the EMI option documents. This gives the company flexibility to make fair decisions based on the actual circumstances of the exit.

What If There’s No Vesting at All?

At the opposite end of the spectrum, many companies choose exit-only EMI schemes, meaning employees only benefit if they are employed at the time of sale.

These can be powerful because everyone focuses on a single, shared goal. But they arguably can also reduce day-to-day motivational impact, since employees don’t see options vesting gradually - it’s a question of micro Vs macro motivation.

Exit-only schemes can be an effective approach if everyone is very clearly working towards an exit, and there is a reduced risk of ex-employees walking away with shares in the company. On the other hand, there’s also the possibility of having employees who stick around in a role they have outgrown or which has grown stale simply because they want to ensure they don’t ‘lose’ their shares. So on a day-to-day basis, if there were a lot of people in that position, that could negatively impact overall performance.

As you can imagine, this generally requires discussion and we support startup and scaleup clients to assess whether time-based vesting or exit-only (or both) align with their incentives, culture and projected exit horizon.

Choosing the Right EMI Vesting Structure

There is no universal answer. The “best” vesting structure depends on:

1. your personal approach to work and your team

2. your hiring strategy

3. your expected time to exit

4. the nature of your product

5. your tolerance for ex-employees on the cap table

6. investor expectations

The key is not to adopt a formula just because “everyone else uses it”. Your EMI Scheme should fit your business’s strategy, timelines to exit and industry.

Accelerate Law provides flexible strategic and legal support to startups end-to-end through angel investment rounds and VC funding rounds, which includes supporting with SEIS and EIS matters, flexible funding for example through Advanced Subscription Agreements, and drafting and negotiating investment terms from term sheets through to completion. Upon securing funding Accelerate Law specialises in working with scaleups as fractional in-house lawyers, covering commercial contracts, trademarks and IP, employment support, data privacy, and EMI Schemes and more. Contact us here or reach out to info@acceleratelaw.co.uk to find out more. to find out more.