How to Design a Vesting Schedule

We have to discuss this issue based on employees¡¯ gradings, aiming to make scheduling the vesting plan more targeted. And here, at this point our ¡°golden handcuffs¡± come into play again. When deciding for a contribution model, it is especially essential to tailor it to those talents that one wants to attract and involve employees more deeply with the enterprise.

In specific operation, the particularity of grading is mainly determined by grade classification and the target of contribution design; while scheduling requires comprehensive consideration about the enterprise¡¯s target for such indicators as the ¡°average service life¡± and actual industrial conditions. Though there is no definite limitation on the vesting schedule in regulations, overhigh scheduling is unsuitable for individualized management and a reasonable flow of talents.

Chart: The Average Service Life and Vesting Schedule¡¯s Target of Enterprise B

How to Solve the Security Problem of Old Employees

For most enterprises with a history of many years¡¯ development, the security problem of those employees approaching retirement is one of the most problematic problems in the process of establishing enterprise annuity in a company. It is not very realistic for many enterprises to solve this problem in one move only because: firstly, it is very difficult to accurately lock up this part of liabilities; secondly, there is huge pressure on financial arrangements; and thirdly, it is easy to arouse misunderstanding among young employees.

Common feasible practice and step is: to define the compensation qualification; determine reasonable compensation standards in view of the substitution rate demand; to estimate and calculate total liabilities and NPV of liabilities; to make an actuarial evaluation of the retirement payment amount and the cash flow generated by this part of liabilities each year. Finally, according to the long-term and short-term liability and cash flow demand a contribution and distribution scheme in addition to the installment on the basis of an investment income forecast is defined.