What is Vesting Condition?
A vesting condition is a requirement that an employee must satisfy to become entitled to a share-based payment award. It can be a service condition (staying for a set period), a performance condition (hitting financial or operational targets) or a market condition (a share price target).
How It Works
- Define the conditions in the grant agreement.
- Reassess them at each reporting date.
- For non-market conditions, adjust the number of awards expected to vest.
- For market conditions, lock in the impact at grant date fair value.
Saudi Context
Most Saudi long-term incentive plans include a multi-year service condition, often combined with an internal performance target tied to Vision 2030 strategic goals.
Example
An award vests after the employee completes three years of service and earns a B+ performance rating in each year.