Requisite service period definition
/What is the Requisite Service Period?
The requisite service period is the period of time that an employee must work for an employer before being able to receive a stock grant. This service period is designed to retain employees for an extended period of time, since they will lose the stock grant if they leave the company prior to the end of the period.
This service period may be explicitly stated in the related payment award documentation, or it may be inferred from the documentation. The requisite service period used by a business tends to be consistent across the stock grants that it awards.
Example of a Requisite Service Period
A company grants an employee 1,000 restricted stock units (RSUs) on January 1, 2024, with a four-year vesting schedule. The vesting terms specify that 25% of the RSUs will vest after one year of service (on January 1, 2025). The remaining 75% will vest in equal monthly installments over the following three years (from February 1, 2025 to January 1, 2028). In this example, the requisite service period is the entire four-year period (January 1, 2024, to January 1, 2028). The employee must continuously provide services to the company during this time to receive the full stock grant.