Firing an employee under a month before vest?

IMO, it's not about this person. It's about the rest of the team and the message you want them to take away. Letting someone go right before they vest will likely create distrust on the rest of the team.

Typically, vesting cliffs are designed to give some breathing room for new hires. If they turn out to be terrible, you can part ways with them without impacting your cap table. If this person had long term performance issues, it's kind of shitty to wait until just before they vest.

I don't know what your company's situation is, but this likely doesn't have to be an "all vesting" or "no vesting" situation. By default, it sounds like you can terminate this employee and provide "no vesting". You can make it clear that you'll be offering them some/most/all of their anticipated vested stock despite you terminating their employment prior to the vesting cliff. This lets you terminate the relationship right now while saving face with the rest of the team.

If it truly is under a month before vest, I’m sorry, but you need to pay it out. If the behavior is so egregious/borderline criminal/a legitimate HR crisis (think Andy Rubin stuff), that’s one thing. But being a poor performer and a bad fit, to me, isn’t enough of a reason to hold back someone’s vest at this stage.

The reality is, you should have fired this person months ago. You didn’t, for whatever reason, and that’s ultimately on you as the founder. That is your fault. Punishing someone who took a risk of joining your team early, even if you’re unhappy with their performance, by cutting their vest seems ridiculously petty and to me, is a sign of a bad manager.

Given the nature of startup options, it is likely the vest amount both won’t be substantial in the long run (if your company succeeds, you’ll raise further rounds that dilute early employee options) or, candidly, that none of this will matter at all because there will be nothing to vest.

This isn’t a co-founder. This is one of your first hires. You made a bad one. It happens. The time to fire pre-vesting was months ago. Taking away the vest mere weeks before it happens is something you would never do to an executive on your team if you were more established. Why would you do it for someone you made the poor decision of not just hiring, but keeping around long after it was clear their hiring was a mistake?

Pay it out. It’s a small thing in the grand scheme of things and hopefully can be a lesson to fire faster in the future when you bring on the wrong people.

Vesting is part of compensation. Denying part of compensation after the fact is bad look. Keep in mind that they're options, and unless exercised, and there's a liquidity event, both of which are highly uncertain, it's all funny money.

If you terminate shortly before vesting:

1. You face the prospect of an expensive and distracting wrongful termination suit.

2. You're sending a blindingly obvious signal to all other employees, and potential employees, that you can, will, and have terminated employees immediately before vesting. That may well prove ruinous if you find yourself unable to hire and/or retain talent.

Let the vest happen. Whether you separate from the employee before or after is your call, though if you've made that determination, do so.

PIPs are fugly as hell for all involved but exist for a reason. You should probably look into setting that up as a process.

Fix your recruitment, training, and monitoring processes.

When my employer laid people off due to COVID-19 they had everyone's stock vest. Linearly vest (as in, if they worked there 6 months they got 6 months of stock, not the 1 year cliff). This is the way to go. The one year cliff is to keep people from leaving on their own accord. Firing someone close to the vest date is a big red flag to other employees. Viewed from outside, it looks like an employer is trying to get out of paying an employee. It's not such a big deal to fire someone a couple months into a year long vesting cliff, but one month is way too close.

I've been fired a month before vesting. My ego was super bruised at the time (this was 10ish years ago), but I'm fine now.

Knowing what I know now, and having been a manager who's had to fire people, I wouldn't have hired me in the first place. What they needed was a senior engineer, what they got was a n00b with a heart of gold who couldn't handle medium to large projects. Wrong expectations on both ends. My manager was also brand new to management at the time so he flubbed this part too, I don't fault him for it because I made basically the same mistake when I first became a manager at a fast growing startup too.

That being said, you can't change the past, here's a few tips:

1. Put the business first. It sounds cold, but that's the reality. In my example I was a super early employee with a crazy large equity chunk. Looking back, it made zero sense to give me that much equity considering my skill level and what the market was for compensation at the time. I had a larger equity chunk there 10 years ago than when I joined to manage the entire engineering team at another company.

2. You can soften the blow with a nice severance package instead of equity if it makes you feel better. Three months severance ain't a bad consolation prize in the startup lottery game.

3. It may be a bad look to the rest of the team if they seemed like they were contributing, but by the sounds of it they were generally a low performer anyways. In my experience, letting go of low performers doesn't cause morale to go down.

In the future, nip performance issues in the bud as quickly as possible. Especially at early stage startups. Putting someone on a 4-6 week PIP as early as possible makes things _a lot_ easier on both sides.

Put together a separation package that works for everyone.

Something like:

* Last day of work is today, all building and system access is revoked.

* Remain employed, on the payroll, full benefits, etc until after vesting (30, 60, etc days).

* Subject to signing an agreement around non-disparagement of the company, not poaching employees, etc, whatever else.

These kinds of things are typical for layoff situations. Trying terminate prior to vesting seems unnecessarily punitive, but you can still get them out of the building immediately.

If they are that bad and you let it run this long (sounds like ~6 months of declining performance), it is either not as bad as you think it is or you really dropped the ball. Either way you should give them the equity and consider it a lesson learned.

Unfortunately, engineering is more .1x engineers than 10x engineers.

Leadership demands you make hard decisions early, with sometimes only 60% certainty, but firing needs to be done as fast as possible for the sake of the team and product. It can be really hard, I've only had to do a few times and each time it was never easy.

Your principles need to be better. You had your time to assess the person and put them on performance management. Some people arent cut out for certain jobs, but the person did their time and showed up and worked and earned their vest. Going above and beyond wasnt part of the agreement. Taking time off and not informing the team is weird - do they not need to request it off? And plain wrong work in the past wasnt picked up on until now... both of these things sound like management issues. Even if they are relatively senior.

Its totally reasonable to want someone who you think is better going forward, but to be as callous as to play politics on something you have used as a motivator is manipulative, contemptible, and a further sign of weak leadership.

Get them out, but let them vest.

Don't delay the decision - You've had performance conversations with them already, so this won't come as a surprise.

Tell them they're on leave immediately, and then pay them whatever they're owed in terms of leave, set their effective termination date for just after their vesting date.

Talk to the team, explain that it didn't work out, but that you're not the kind of founding team who will screw someone out of their equity weeks or months before their cliff.

The team will respect you doubly : For getting the under-performer out of their team, and for treating them fairly. This may sting a bit, it's your company and you're killing yourself to try and make it worth something.

Consider that the cost of learning how to be a better boss and not having made the hard decision earlier.

If you go the other way, you risk killing your velocity and losing the people you need.

Hey there.

So after thinking about this for a while, it occurs to me that you might actually have an employee who has a problem with the other employees.

Normally, giving/getting feedback (in my opinion) means that they care enough to actually perform to some extent.

But if they are taking off without informing the other employees... that tells me they don't respect those other employees for some reason. It could be that this employee is just a jerk; but it can also be that the other employees are the jerks. I know that may seem a stretch, but I've run into it before myself, where the other employees were doing all sorts of things wrong, and were risking getting customers sick/hurt. So of course I did the right thing, and did my job, which is make sure that sort of thing isn't happening.

The result? They all complain to the boss, claim my work is below standards, and get me fired.

I wonder if this is the case for your problem employee as well, because you say it 'felt like squeezing water from a stone'.

I can totally be like that in the eyes of some at times, especially when I am verifiably correct about something. And guess what the group thinking mobs tend to hate the most? Yup, people like me who don't budge for nimrods.

So I wonder if things go worse because of the others recognizing they weren't getting their way and so they are now making things worse for that employee. I know that if it were me, I would certainly start to give a lot less fucks about a lot of things, especially if the boss is taking the wrong side of things.

So ask yourself this.

Are you being fooled by fools?

Founder, similar stage, though haven't encountered what you have. Read through your other replies.

I would grant them the equity. It's on you for not firing them earlier - don't make them pay for that mistake.

Founder of a Series A company. Just give them the equity which should be in the form of options at this stage, which they will need to choose to exercise. If shares still give it to them.

If you don't people will gossip and hurt employee moral.

As for effect on cap table, theres no issues with a former employee having some common shares. If you raise money it will likely be in the form of preferred shares.

Find a better way to indentify under performers earlier so it doesn't drag out to this point

Don't be that guy. Let them vest and be on their way.

Being generous and parting on good terms is desirable, even when they suck. Even moreso on a small team.

My gut feeling here is that the founder has an outsized perception of the value of the potentially-vested shares.

95% of startup shares are pointless funny money. The remaining 5% that turn into something only really make wealth for the founders and the VCs. Having been through acquisition a couple times and seen how it shakes out for individual contributors -- most employees could make more money in a year or two of regular FAANG compensation.

I know those shares look super important to the founders, and founders need to believe in their business to stay motivated. But the share agreements for startups these days rarely provide more than a small fraction of a percent to an employee, and even fairly generous exits lead to "helps with downpayment for house" level money, not "retire in the south of France" or "go start my own startup now" level money. https://www.tldroptions.io/ is informative here.

Those of us who are working in startups as employees don't do so on the hope of getting rich -- we do so because the work is sometimes interesting. In competitive job markets, founders need to keep this in mind. For non-junior employees -- or anybody who has been around the block -- the equity is rarely the thing keeping them there. The work environment and project is.

All this to say, focusing on the vesting seems silly. Those shares are likely useless and not worth getting stressed about. Unless this person was offered a substantial equity stake, it's the wrong thing to focus on.

Fix your performance management process and move on. Playing games with the equity now is only going to make you look petty.

> One of those (one of the first to join) has been an issue for quite a while. Lots of time off, low effort at work, minimal hours. Felt like squeezing water out of a stone to get a result from them.

The real issue here is that this wasn't properly addressed by the company when it was a going concern. Now there's a "reason" to do it, the vesting event, you are attempting to fit a round peg in a square hole with this type of rationalization. And thus, you then find yourself questioning it and putting it up for public consideration.

It would be expected that a person's behavior will "double down" when they get closer to vesting. They can "be themselves" the closer the event comes. That said, they also "stuck and stayed" at the company through all this.

The best thing is to not discuss this further and do the right thing even though it's difficult. You've already made up your mind to let them go. What can also help is to let go of the blame you've applied to them over the years and give them what they have earned by staying: their stock in the company.

I am not a lawyer, nor a US person.

Since that employee being around is an ongoing net loss for the company, you could consider quietly sending them off to garden leave to end on the day after vesting, conditional on signing a severance agreement that's favorable to you (do not disparage, do not solicit etc.)

On the other hand, in some jurisdictions firing an employee a short time before a benefit is due may actually be legally hazardous.

Under the normal employee grant conditions - specifically waiving off power of attorney for governance - there shouldn't be that much that person can do to harm you. (They still might have access to shareholder reports FWIW). If they care about vesting, probably they have at least some interest in the company's success.

A final angle is the optics towards other employees - even if they don't like the person in question, you probably want to appear reasonable - which includes making an effort to part amicably.

So the takeaway here is - consult a lawyer and try to work a quiet solution so that everybody can go back to building that startup you care about so much.

Founder of a late-stage start-up here. Firing people is never fun, and pretty much always I (and most of my founder friends) drag it out. With some people, PIP would work. For most people it doesn't. You don't need to put them on a formal PIP as long as you've been direct with feedback, and your legal environment allows at-will termination. As an early-stage company, especially in this economy, you don't have the time in engage in this luxury.

What I'd do - if this person has been underperforming under bad faith, and you have this well documented, I'd move to terminate right away - vesting or no vesting. If that means they don't get to vest, too bad. Don't be scared of lawsuits - yes it will be unproductive if a lawsuit pops up, but if you've been following the law, and you've been following your contract, and you have been direct about the under-performance, the law will be on your side.

When someone is allowed to operate in a team in bad faith, it also severely demotivates the people who perform well. And when this person is allowed to derive a benefit which they don't deserve, it is unfair to those who are putting in their time. And this employee knows that there is a 1-year cliff with vesting; the whole point of that cliff is to weed out such employees.

If they have been underperforming for personal reasons, or because they're not best fit for the job, or if they have benefited you at some early stage, perhaps with fundraising, initial prototypes etc, and then lost momentum, then some amount of empathy is justified, and you can apply that at your discretion. In this case, I'd immediately send this person on garden leave, and terminate past your vesting date, since that's so close.

As to whether there are any downsides on having them in the cap table - it depends on how much equity they hold, assuming that's very small, then no.

Firing bad employees (and customers) is the opposite of planting trees. The best time to do it was months or years ago, the second best time is now.

Rewarding an incompetent shirker is financially foolish and sets a tone for everybody else in the company. If the employee is as bad as you say he is, everybody that works with him would know that and fully understand why he was sacked.

Employee equity is a rounding error compared to what founders and investors make. You’re talking about 2% of the company, max? That’s usually vested over four years, so the one year cliff means they’d get 0.5%.

They put a year of their life into making you rich. I would part ways amicably and be generous.

If you IPO, none of this will matter either way. So if you fire them early, it’s a needless risk.

My mental image reading this is that you demand overtime, are reluctant to allow holidays and are trying to fire this person before you have to deliver on promised compensation.

Of course I could be completely wrong.

Out of curiosity what counts as lots of time off and minimal hours?

I read this and am glad to live somewhere with legislation covering working hours, rights around leave and around being fired.

This is pretty dirty, you should have let them go a long time ago. Now you will destroy a bunch of your credibility if you do them dirty, your team will act like it's okay, but its not and you will lose more than you gain. I'm saying this from the perspective of an employee who has worked at a few small startups. Learn from your mistake.

Maybe ask the employee if they are having personal life issues or have issues with the vision? I know I’m under a lot of stress lately and been performing slower than usual. Maybe you should consider if they are burnt out after being the first employee? Maybe they put in a ton of effort at the front end and now they need you to be a leader and help them become less burnt out.

You’re treating it like they’re a machine who is starting to break down and needs to be replaced. This is a shameful post for a founder.

I'm surprised to see how many people are saying that this is a bad look. You want to fire this person so fire them.

> Should I let them vest then let them go, or just let them go? Feedback from former founders esp is helpful. Any downsides to having them on the cap table?

IMO the time to fire an employee is as soon as you have decided that you need to fire them. That's all there is to it barring an extreme circumstance, but in this case it's clear cut - you gave them plenty of time, warning, etc. It has gotten worse.

As for your cap table, I doubt there are serious implications to having them on it, assuming they're just typical common stock options and not very many. That said, the first time I fired someone I got on a call with my lawyers to make sure everything was ironed out - I suggest you do the same.

Firing people really really sucks. It's maybe the worst part of the job? Not sure. But ultimately that's what you sign up for when you start a company. It's not fair to anyone else on the team to keep someone around who you know needs to go ASAP.

I see a lot of posts saying that your other employees will feel negatively. That's not my experience at all. If this is a justified firing they probably already think it should have happened and they will totally understand why you had to do it. Explain to them that there was ample notice, you set a timeline for improvement, you saw things get worse, and so you took action.

edit: I will add that:

a) It's your company, you ultimately make the calls on how these situations are handled

b) You're going to have the most context. No one else has the same view of how the company is structured, how people will react, etc. Use your best judgment.

Is it only you who has the problem with them or the entire team?

If it's the entire team then get rid of them asap, after checking corresponding labour laws. Imagine you work hard and someone's smooching off your hard work, then they get paid the same to boot! That shit negatively affects everyone.

I agree to the general sentiment of this thread but...

> Taking off without informing team

You tolerate such a behavior if you let him vest and show weakness. Maybe the guy did worse things, talked behind your back and what not. Maybe there are more people who would appreciate his lay off and then, wonder why he still got the vesting. Letting him vest might make you the nice guy with an easy company to work with but could also frame you as the dumb, weak CEO who doesn't dare or can't make tough decisions. It's a thin line.

Not an easy decision and the majority goes for the easy way but there must be a better solution. Despite of a lot of good advice in this thread, I wonder how many in this thread are founders/employers vs employees.

It's unclear to me: Why are you wondering _now_?

Vesting is compensation unlocked after a period of time. It is _meant_ to keep people _engaged_. You shouldn't feel bad for having to terminate someone two weeks before vesting, or 1 month before vesting, or 6 months before. No more than you should feel bad for having to stop paying someone that you fired.

Do you have _facts_, undebatable ones, demonstrating that the person is below expectations? Do other team members share the same point of view? Do you have feedback from others, pointing out that this person wasn't pulling its part? Did you share that with the person? Did you share these elements, did the person acknowledged that there was missed expectations? Did you agree on concrete goals to progress and meet expectations? Did you guide that person on this, for like 2~3 months?

If you answered YES to all these questions, but the person is still failing, then let that person go. You've made your job. Whether they are vesting tomorrow or in 6 months or in a year, is _a detail_. They have been failing to meet the bar, you've told them, you explained them how to reach it, you guided them for some time, and they are still failing.

If you didn't, then start right away.

Put vesting in parenthesis. That is not the topic at hand. The topic is meeting expectations or not.

You made this situation worse by not firing them sooner. This is 100% on you. You let this drag out far too long until it comes time to vest.

Now you're going to make this even worse by not letting them vest? You're making mistake after mistake. You're going to look like an asshole in front of the other employees and they won't forget that because you could turn around and do it to them.

‘Despite feedback’. Was that feedback clearly given in a sit down? With more than 4eyes present? Confirmed afterwards in writing to the employee, in a clearly worded ‘here is what we discussed’ email, stating behavior and output has to be stepped up? If ever it came to a discussion be it personally or even legally, do you have a track record to prove to yourself you did enough to warn him? If yes, then let him go. If it’s ambiguous, I would reconsider, from a legal and personal pov. Depending on the amount of vesting after this cliff, it might be worth it to let him go w some of the shares two months from now, and take your loss (moment of learning) for not resolving this in a more timely manner, and be more on top of it with other employees.

It's tempting to think in terms of right and wrong, or whether or not -- to simplify decisions for the sake of moving forward.

The question is not whether to fire, but how to manage this person, whether present or former employee/founder.

As a founder, you're creating something with at least as many dimensions and perspectives as you have stakeholders -- not a graphic but a sculpture. Worse, as the founder/creator you actually can't see things from stakeholders' perspectives, because you don't have their concerns or knowledge gaps or insights. Even worse, you're building a live thing: you start something and it keeps going, becomes precedent or expectation or concern. So it's a multi-dimensional seed.

To avoid getting lost in situations like this, get in the habit of putting on everyone's hat for a minute, and then think about the dynamics, and then ask what's the distinguishing feature of this situation. (Ideally you develop a team doing the same thinking, and then they can do this without you as the business grows.)

Other commenters have mentioned some of the perspectives, particularly about people's sense of fairness. But I think the distinguishing factor here is the safety of closeness with deciders.

If you as the decider fire this person for not putting out, and then it comes out they were struggling with something they couldn't share (e.g., an addicted spouse or sibling?), aside from piling havoc on horror, you look like you don't understand those working closely with you and don't appreciate their (earlier) sacrifice.

You want people to tell you the truth -- about their situation, the business, and you as a person. If you don't know, that's your problem. You don't have to agree with them, or even understand how it all fits together, but you should know.

So, all thing considered, in this case I would recommend doing something that will ensure observers will be more inclined to come to you with the truth, not less.

Sooner, softer, smoother...

I want to provide a bit of a counterpoint from personal experience:

A harsh firing process can actually even improve trust into management/leadership.

Poor performance especially in smaller companies is often very noticeable to coworkers and firing people for not performing at all can signal that management is willing to follow through with hard decisions for the good of the company (and that IS important to employees!)

If there is consensus in your team that your disappointing employee is useless, than firing him on the spot might be the best thing you can do to increase trust in leadership (but this is a hard decision and a lot more context would be needed to judge).

Not sure about legal ramifications but can you offer them the opportunity to “depart now but remain on the books until vesting”?

I don’t know the compensation details and I’m not trying to be mean, but if you’re an early stage startup, odds are the options are worth negative dollars (zero minus strike price). It may be insulting to say, “we graciously kept you on so you’d have a chance to buy into the startup that’s firing you.”

What’s chiefly on my mind is that I think you shouldn’t unilaterally decide what’s best for them. Maybe they don’t want your stock and would have preferred you just be honest and prompt.

View anything as a price to the company. This is a lesson you pay to not identify the problem and fire them early. Putting generosity aside, as an early startup, you cannot afford legal battles and ex-early-employee badmouthing you afterwards. And for an employee this early, they get what, at most 1% of the equity with a vesting schedule of 4 years? So at most 0.25%, which is nothing in the long run regarding the company's success. So, have a chat with them, negotiate at least 6 months equity, ask them to sign an agreement, and let them go asap.

maybe there's other stuff going on? Family life is burning down around them? They probably used to be good, and now they're not, so might as well ask directly. They probably have thoughts on it.

I would feel out the rest of the team, see about their opinion of the guy.

My other consideration would be on whether or not I've actually let this employee know that there was a problem.

Did they know they were on the edge of being fired? Did they know their performance wasn't up to expectations?

And I mean, were they explicitly told these things? Are these things documented?

Because if the team doesn't like him and you have multiple documented instances where you told him his performance wasn't adequate and his job was in jeopardy then do you could fire him 5 seconds after you read this message. In that case was given every chance and threw them away.

But if you've just been mostly silently stewing about this and giving passive aggressive hints that he needs to step up, with your only note being "I need this now". Or if the team thinks he's pulling his weight and that what's being asked of him is too much, then you should let him vest. Because in that case, you're the one who made the mistakes.

Basically, determine who made the mistake to let it get to this point. And that should tell you whether or not to let him vest.

I'm willing to bet it's more latter than former considering you're here asking for advice rather than printing out all of your documentation to show him why you're firing him.

> or just let them go?

You're firing him, you're not letting him go.

> They vest in a few weeks

Who? Who vests? "They"? Talk straight dude.

> Feedback from former founders esp is helpful

I'm a current founder. You just fire the guy. What are we talking about, it's your company! You don't have to give him any shares. Even if he had vested!

Do you know how any of this works? You're talking so limp right now. It's all flexible. It is all subject to change. Every deal, everything you put in writing.

To quote another user:

> I would grant them the equity. It's on you for not firing them earlier - don't make them pay for that mistake.

This is the limpest shit I've ever heard. What the fuck are these people even talking about? The cliff exists for this very reason. The purpose is to let you spend your sweet time to fire someone, which you did. Okay, and now you don't have to give the shares.

You're in charge.

Another commenter:

> Rewarding an incompetent shirker is financially foolish and sets a tone for everybody else in the company. If the employee is as bad as you say he is, everybody that works with him would know that and fully understand why he was sacked.

This is the only outcome that makes sense. Just tell everyone that you fired this guy and did not give him the shares. End of story. If he sucks as much as you say, people will be relieved to hear you didn't give this fuck shares for nothing.

The vest schedule means "if you're still at the company on day X, you'll get Y amount of equity".

You have a specific vest date for a reason.

If you wait to get rid of that employee just because they have equity vesting in a few weeks, it means that the vest is not on "day X", but on "day X - a few weeks". But that's not what the vesting schedule says.

The only logical decision is that whether or not they are vesting soon does not matter, what matters is you want to fire them now, so do it.

I understand that there is a supposed moral aspect to it as well, and that's probably why you asked online. Once again the decision is easy, do you want to fire them today because they are not performing, or do you want to fire them today because they have their vest in a few weeks?

For me the fact that you are even exploring the possibility to keep them onboard a few more weeks means it's the first situation, so I see no wrong there.

Lastly, some comments are predicting doom for your startup due to the bad reputation this would cause, including journalists knocking at your door and customers setting up a guillotine outside of your door, but this is all BS and isn't going to happen. Even your other employees will probably not know about this vesting schedule "problem".

The only ethically right way to handle this is to pay the amount that would have vested prorated to the time spent vesting. Perhaps combine it with a non-disparagement and non-disclosure agreement as well as a promise not give negative references.

Equity based compensation is a bargain between you and an employee that they forgo immediate salary and supplement your cashflow in agreement to be repaid for that at a later date. Anything less than that means you're displaying that you don't respect agreed bargain on behalf of all your employees. You also burn a bridge forever of someone that was there at the beginning. You lose an investor, but gain a permanent detractor. I'd strongly consider never joining your company if it was known you'd done this to an employee, so you need to fix that in your favor (by either vesting or paying the employee).

You may find this is acceptable to the employee as a way to save face and leave a job that they're either not enjoying, is past the point where they care about, or even where there are concerns that you are unaware of that are causing this behavior (health, relationship, life etc).

Not a founder here, so I'm just giving a general leadership perspective.

I think you should completely disregard the vesting in your decision-making. I'm guessing you've not developed a performance management process in your business yet. You've highlighted that you gave feedback, however I'm not sure if you've set out a process by which they stay or go.

This isn't the end of the world, you can do this process now:

1. Give feedback on the behaviour (you've already done this)

2. Escalate the feedback to a written warning, highlight what you want to see change and when by

3. Once that date passes, if the change hasn't occurred, let them go

This process doesn't need to take very long: it should depend on expected timeline to make these kinds of changes. If these are behavioural issues, then 2-4 weeks should be sufficient.

Assuming the person doesn't change, you'll let them go. This will be a shock to your other employees, so call a meeting with everyone afterwards. Make it clear (without going deep into the details) that this was a performance-related sacking. Highlight the fact you gave feedback, with clear and actionable steps to improve, but the situation didn't work out.

If this seems onerous consider it this way: you're not doing this for the team member you're letting go. You're doing it for the rest of the team. You want to reassure them that you're not just looking to screw the team out of vested shares and that, if you haven't discussed performance issues with them, there's nothing for them to worry about.

I was let go from a small startup exactly one day before vesting, on specious grounds. A lawyer I consulted stated that I had strong grounds to sue on legal grounds of bad faith, with probable triple damages. I pretty quickly decided to let it go because the company founder was a dishonest creep and the company was going nowhere. Ask yourself whether pursuing any such claim is actually worth the hassle and time and money.

That happened to me, but much worse. They said I performed well, but in their words I “wasn’t the long term employee they envisioned for the company”. That was the best lesson I received about work ethics and helped a lot to shape the rest of my career. I’m thankful I saw this kind of disgusting management early. I would be trapped in that sick environment and low salary until today if that hasn’t happened.

> Lots of time off, low effort at work, minimal hours. Felt like squeezing water out of a stone to get a result from them.

From my experience this was always due to low pay and to a lesser extent bad management. When workers couldn't find anything better they focused on side gigs to top up their wages or giving a shot at their own projects hoping to launch their own business, so they were not fully focused on anything.

The way I've structured options agreements is that if someone is let go without cause, they get their prorated shares that will vest next. So half way through the year on a one year vest? Give them half the shares. If we fired with cause (which usually requires somewhat egregious behavior and isn't just an employee not working out), then they did not get anything prorated. If they quit, generally we'd also prorate unless they leave us in a lurch. It was setup this way contractually for us, but you could certainly choose to do it this way willingly without the contractual obligation.

Not enough detail.

How long of a period was the vesting cliff?

When did their work start having issues?

When did you first talk to the about it?

When did it get to the point they weren’t doing their job?

If they were still doing their job (even to a minimum standard) by the 2/3rds point, I’d let it slide.

Keep in mind as a the boss you should have been on this from day 1. If you do fire them it shouldn’t be a surprise. If it will be, then let them vest.

I understand that it's uncomfortable on a personal level (looking at it from both sides), and you might wanna consider the optics for company politics.

On a purely mechanics level I am somewhat confused: If the setup is such, that firing the employee can lead to cutting them out of the vesting at this stage, then that's because it has explicitly been built into the vesting mechanism. If that is not an option that you are actually willing to exercise, or if the employee is not okay with this being used as mechanism against them, why was this contract set up and signed by both parties?

If there's no good answer to that, revising the system in a way that everyone involved feels actually okay with seems like a good next step. Since I am not all that deep into vesting mechanisms, I am happy to learn why this is might be a dilemma situation that has no generally acceptable solution.

You should vest them monthly instead of only after the full term completion.

If the full term is 2 years, pay him 23/24 and let him go.

> One of those (one of the first to join) has been an issue for quite a while

Focusing on the vesting issue is secondary to the fact that this employee should have been fired a while ago. Risking giving up a little equity is unlikely to be existentially risky but keeping distracted unmotivated and incompetent employees around definitely is.

If I worked at your company and saw that you were firing people right before vest, rightly or wrongly, I’d assume worst case that’s a possibility you’re maliciously doing it and would probably jump ship.

Additionally, if asked by friends in the industry why I left, I’d be honest about the experience.

Not a founder here, but yes having the guy on the cap table costs you. Every month, there is that percentage of your work and your team’s work that goes into their pocket, just for the tiny bit of work they did in the first months. It’s always going to be a thorn in your thigh.

Plus you’re going to have to explain to investors who that person is, and why they’re on the cap table and not in the company.

Vesting is a form of trial period. It’s the rules of the game. You warned them. They didn’t react properly. That’s it.

Moreover, firing them allows you to keep those stocks so that you can reward someone else. Someone who’s actuelly been doing the work.

You should definitely fire them right now. You need to control the narrative though. Make sure everyone on the teams understand the move. People shouldn’t be surprised.

Why not just fire them, but accelerate their vesting to today? That gets rid of the actual problem employee, signals to everyone that you care about the workplace, but also signals that you will treat your employees fairly even in the case of termination?

Definitely just fire him and be open about why with the rest of your team. If you are really worried about the rest of your team, just discuss it with them first and ask them for advice on what you would do, most of the time if he's really slacking they will wonder why the guy is still in the company.

The other option is to just fire him and then explain that you've been given feedback to him for a while and that you've had enough and that letting him vest would just be plain unfair to people who do put in the work.

Depending on the size of his grant, your current and future investors will think you are weak for letting him vest. That's also a conversation you don't want to have.

Make sure that you terminate early employees on good terms. Have a termination agreement in place so if investors or employees reach out, you would have neutral or positive feedback. Make sure your termination agreement follows the law and is not ones sided, (or it would not have any effect as such agreements are not enforceable). Make sure that your HR and HR only can provide feedback regarding that employee. Oh, you don’t have HR? You probably done a lot of things that are illegal and opened yourself to lawsuits. Have you been paying him market salary? If you’ve been paying sub-market salary don’t even think going after the stock.

it's not all or nothing. you can let them go now and vest them 6 months. i would keep in mind, this person may not have been productive, but they have taught you an extremely valuable lesson. you should vest them at least the 6 months.

To me this comes down to legal. If the person has been documented as a problem, corrective actions have been documented, and whatever you have as an HR dept says it's ok to fire the guy, fire him. If you feel guilty, then offer him a portion of his potential vesting, and explain that he was shit, but you don't want to leave him empty handed.

Is the timing great? No. That's why it must be well documented the behavior your penalizing. He will almost certainly come back to sue you for wrongful termination if there is no documentation (and you have any value to your shares).

Good luck, cut the dead weight, and move on.

Presuming they’ve been there a year, you cannot expect current and future employees to believe that you only figured out that they’re useless a few weeks before vesting. Like, that might be true, but no-one will believe it.

If this is the first time you've fired someone, consult an HR firm to make sure your legal bases are covered. Legal fees + insurance policy rate hikes are existential threats to your runway.

You're probably over-valuing the (non-liquid) options, since that's part of being a Founder.

If your equity is worth real money someday, you'll have the opportunity to buy back the shares (or introduce your ex-employee to an investor interested in purchasing). This is a win/win for early employees who tend to value liquidity. Part on amicable terms so this isn't an awkward conversation in two years.

Can you afford to buy back the equity you would have accelerated? We had this happen and vested them, but the person didn’t really appreciate the equity at all, despite it ending up more valuable than the cash.

If it’s really an issue, you can get it both way. Fire them now and pay a prorata of what would have vested as severance but you are opening a can of worms regarding who get what when.

You can also talk to them, tell them you have noticed they are disconnected and have the feeling that they are waiting for vesting to leave the company. Say you find their current performance unacceptable but don’t want to deprive them of their vesting and see if you can work something out like an unpaid leave until the due date.

Concentrate on the company's future.

A big and expensive wrongful termination lawsuit is not what you need right now.

Sending a message that you can fire a guy weeks before cliff is not what you need right now.

In your position, I would offer the guy two options:

A. Lifting of his cliff for the time he actually worked (if he worked 10 months, then 10/12 of his yearly schedule) — in stock options that the guy needs to exercise by bringing money; or

B. Three months of severance pay — in real money (or some other perk if three months are a legal obligation in your jurisdiction).

Yes, it's an absolute dick move. If it's that bad, accelerate his cliff and let him leave early.

Had a situation where I was let go 2 months before my cliff in an advising/part-time situation, and while I won't say anything negative about the company and most of my colleagues, I was honest in respect to the exec teams behavior. Zero of the 4 applicants who I relayed that to accepted their offers. Was my small equity stake worth (potentially, may have had other reasons) 4 hires?

Question for you all, let's say you have an under-performer in a startup. At what point do you say it's fine to fire them without them vesting anything? 6 months?

I found it hilarious that most of the people advice something along the lines of "you ought to let him vest for X/Y/Z reasons".

Is HN quiet-quitting and afraid of similar thing happening to them ;)

You don't owe him anything more than what has been agreed upon signing the employement contract, especially considering what looks like gross underperforming (if not blunt misbehaviour).

His vesting in 2 weeks? Too bad, this literally shouldn't matter to your decision.

You had better be careful. You mix "them" with him" in your description. You have to make sure that each and everyone of the individuals that you are thinking about taking action, is based on HIS or HER INDIVIDUAL PERFORMANCE ETC. Not a lot of precedents for this kind of action on a group without looking like you are trying to keep them from just vesting. It will go better if you have their transgressions OTR.

I presume you mean vesting options? If so, then this means they need to still pay (albeit a discounted price) to get shares. And your employee sop, should have a limited time for them to exercise those options. If you’re early stage then do you truely think they will spend cash to buy shares with no liquidity (and possibly never of liquid value)?

Maybe this is a non-issue.

As all of these posts state, it's likely the wrong move. Of course, you could always get the employee to 'voluntarily' accept being let go for an alternative lumpsum or some other incentive. It's not the most moral of moves but if you can convince them to agree and sign something that changes the original contract...thats kind of on them.

Vest them proportionally, and tell them that you are doing it early to fully maximize the potential value of those options that vested.

I'm surprised I don't see any questions about viewpoint, perspective, or diversity of opinion.

Is there some wisdom being applied in their lack of enthusiasm for the task at hand?

Maybe there's some purchase or acquisition that's turning their part of the task Sisypheaan?

Perhaps they have some illness, or family issue?

These are all obviously important questions to answer before you retaliate.

You don't want a person like this to own shares of your company. Offer him a small severance package, and forgo the stocks.

It's very important how you communicate your decision to the rest of the company. You don't want slackers or troublemakers or parasites to infest your company; but at the same time, you want to respect the dignity of everyone.

You already had a talk about the issues you experienced and it was getting even worse. I can’t see any reason why you should wait.

Pro rata it to the day they leave.

Job done.

Employee is happy, employer is happy.

You'll get a brutal reputation externally, possibly some journalists pointing at your startup, destroying your ability to hire. You should have done it earlier or not do it at all. Employee might have their side of the story that could be very unflattering to you (were there any unfulfilled promises in the past?).

Let them vest, fire, and buy them out. Also you need to have an evaluation with the ones who hired and onboarded them.

Keep in mind that most options have an expiration date on when they can be purchased after the employee no longer works at the company. Furthermore most option agreements have a ROFR clause. I would say let them have the options. There is good chance they might not even execute them in the required window.

Are you in a position to offer the cash value of the impending vest? (Not back to an old 409a, but at a current or projected reasonable valuation.)

If so, that keeps your cap table clean, which has value, but still pays the employee for their time.

You know the mistake you made in waiting too long to decide to fire, so I won’t harp on that.

Vest them, then let them go. It isn't worth the potential noise it will generate in the fallout.

As an employer, it is never a bad thing to look a little generous (I said a little) when you terminate someone. This eliminates (or at least lessens) potential liabilities, as with severance pay.

Fire them now but give them the vest anyway. Just stop their pay but list their employment date as the day after vest if you have to - but discuss with your legal/HR on ways to ensure they don't try to collect "back pay" for those few weeks a couple months from now.

The person is most likely going to quit the moment they vest from the way it sounds. They are probably miserable and just biding their time to vest themselves. So it’s up to you whether you want to fire him/her first or just let them quit once they vest.

What is the employee's side of the story? Why would somebody close to vesting intentionally risk that? Maybe he's experiencing burnout or health issues? Maybe he's having a rough family situation of some kind and needs a friendly word?

Welcome to management. Fire them.

Fire him immediately, pay him the fraction of his vesting that he’s earned without regards to cliffs. Everyone will view it as fair, and simultaneously be relieved that this guy is out. Try to fire faster next time (easier said than done, I know).

The message you send to the rest of your staff if you let them vest is: I no longer have to work hard, I can slack off and get another job, have some future equity. The message you send if you just fire without vesting to the rest of the staff is "watch out if I don't like you I will extract work out of them and fire you to avoid vesting. Both are hogwash. You are in charge. That does not automatically make you Mr Nice GUY to all your staff.(though I would hope you are)

Presumably you have employment contracts setting out conditions. Follow the contract. Get legal advice. Fire immediately and let them do their worst.

If your employment contract didn't cover confidentiality then more fool you.

If the employment contact allows, fire the guy now, make it a condition of his termination that his/her 'vest" will happen but be held in trust for 6 months subject to conditions of confidentiality etc.

Just let him go now, tell him he can vest for his first year ("no hard feelings, you were an early contributor", blah blah), conserve your cash. Odds are he won't exercise anyways.

Just fyi, you're way to specific with the details you've provided

Let them vest.

There are half measures: giving them a PIP with a month to improve, letting them vest early, etc.

But these risk sending a bad message to other employees.

Firing people right before cliffs has the potential to drive away employees.

IMO vesting is a part of compensation but it's conditional. If the past work was subpar I would fire before and give distribute to other employees. I would explain why it's the case.

Unpopular opinion: if I were on the other side, I wouldn’t care. I value “equity” in a random early stage startup at essentially $0. Statistically that what it’s going to be worth.

If you were to ignore all of your feelings, frustration and disappointment in this employee, what produces the best long term outcome for you personally? I'd aim at that.

- Lots of time off

- low effort at work

- minimal hours

I joined a team after acquisition that had such an employee, and they were all disappointed that she got fired after the cliff and received some equity.

They might not exercise the options, and even if they do odds are they're probably not going to be worth anything anyway, so why not just let them vest?

I don’t know what the laws are in your country but consider putting them on gardening leave until they vest. I think this sends the right message to everyone.

We embrace monthly vesting schedule at Kagi (1/48th every month for 4 years) which could deal with some of the issues discussed (no cliff anxiety).

It doesn’t sound to me like they’ve put in the work to earn the ownership share. I think it’s unfair to yourself and remaining team to keep them around.

Does the contract says anything about this situations? Like notice period? Is the notice period long enough for that person to go beyond vest date?

Fire. Doesn't seem like they deserve the equity anyways. I'm sure the team will be thrilled. Who likes a co-worker like that?

Would have fired them earlier. Pro rate and fire.

You could split his shares amongst the current team and best them immediately. The ones who work hard will be glad he’s gone.

Most likely your stock won’t be worth anything anyway so why does it matter? I assume they have to pay for the options?

Just thinking outside the box, if they are as you say, and the rest of the workers have been carrying them, maybe a 3rd option is distribute their stock to the remaining employees (maybe according to contribution but everyone gets some)? While concurrently making it super clear it was due to performance.

Perhaps make that distribution immediately vest too. Then no one can claim you're firing just to avoid vesting stock.

It’s still a small enough team that I’d collect my thoughts and discuss the issues with everyone in a meeting

How about fire the employee & distribute the unvested options among the rest of the team.

Thank everyone for doing such a good job collectively.

Shows you don’t have any patience with seriously poor performance despite feedback. You are going to be nobody’s fool

But also shows your motive wasn’t to claw back anything, and you will be generous with workers who perform their jobs professionally.

Also shows some creative adaptive leadership problem solving.

Anyway, that is one thought

Fire them. The other employees will get pissed if you don't.

Everybody already knows they aren't doing any work.

Make the tough talk and let him go ASAP. Or you encourage weakness and laziness.

This is an argument against vesting cliffs. The function should be continuous.

Let them vest.

Years from now you'll be glad you did. Be generous rather than mean.

Bad idea. Let them vest then let them go. Money does not equate value.

Let them go, but as part of their severance package, let them vest.

As much as you feel that this person deserves a comeback (and I feel the same by your description), that's not about it. The team will question and distrust the company, you will give enough fuel for grapevine conversations that already happen (they have signal/whatsapp/discord groups where this is an active subject). I'd pay out, let this person go and never talk about them again. This way when they come back or keep saying bad things about the company there will be more people to remind them that everything is on the table except honoring agreements, which they didn't do btw. It is hard being a human tho, we always want to drop the lightning bolt on what we perceive as unfairness but it is a person against a company. Let it go.

Offer them a “leave now quietly” deal with some severance.

If you would be relieved if anyone quit, fire them TODAY.

If they are bad they don’t deserve equity. Don’t let them vest.

Any controversy? Explain he was terrible. You have to deserve equity. That’s what the vesting period is for.

Ok, this is a highly contextual decision & whatever is written below is from the very little details given in the question & my experience of running a 30+ people early stage startup, been a founder for 4 years. Coincidently, I did the exact same thing a month ago & can imagine how hard of decision this might be. Also, am not a lawyer, please discuss with them for sure, preferably external & not internal one as there might be conflict of interest!

I'd say "Let them go without vesting"!

As you say, seems like the person has become the toxic component of the team & doing -ve work. If I were to guess, you didn't let them go earlier because of the "hope" you had & benefit of doubt. You could have let go of this person long time ago & not bothered abt all this but you wanted to give leeway. This person completely took advantage of the leeway.

Since you have a very small team, it must be close-knit as well. Hold a Townhall, show the evidence of what all you say i.e. slack message, github commits, emails etc. Your employees are not dumb. Explain how, the person to be fired wasn't cheating just the company or the founders but also rest of the team. You letting him go with esops is UNFAIR to the team, compensation for the work not done.

This will be the last time you justify your decisions to the team. Never let this happen again by investing in a stronger & more objective feedback system, if you have made your mind to let someone go, let them go ASAP.

I am sure Someone else must have been picking their off their slack, reward that person; don't keep the esops back, give it back to them team to the people who took care of the work that this person was supposed to. You letting him go with esops demonstrates your unfairness to the rest of the team; people who might have joined late & have none or much less esops contributing more.

This won't be the first time it happens & soon you will let go off someone with esops, which creates a contrast to show everyone that what happened is not usual practice at the company but a one time thing happening only under exceptional circumstances like this.

At last, expect a fallout, 1-3 people, talk to these people in private, give them more details & context than you gave in the Townhall. And if they go, they go because you would encounter the same entitlement as the person you are letting go off, sooner or later in one thing or the other.

Another option is no esops but give then a settlement, a % of a value of ESOPs if you can to be a bit more fair.

Also, depends upon the amount as well; if it's meagre, let it be. If significant, then you can't let it get away.

And Yes it can create a mess on the cap table as you grow larger. With bigger rounds you will have more due diligence & justifications to provide; close the chapter ASAP & move on!

and the best part for the last, you let them go, they are gonna create a ruckus within the team before/while/after they leave. Doesn't matter they leave with or without equity i.e. if they don't already plan on quitting right after vesting. They will contest the firing unfair anyway, and maybe fight you on the rest of the esops yet to be vested as well. You will face the flak then as well.

Each minute you keep the person in your mind, it costs your company an opportunity loss & mindspace + time loss to you.

PS - When I was first suggested to fire this person by my co-founder, I couldn't imagine doing it; thought our tech would collapse because of all the lost knowledge etc. Then we fired them & 2 more people left. Within 45 days, we are doing better than ever, had one of the most productive month in last 8 months but that's a story for another time.

Get the other team members individually for lunch and ask them what they think about it.

Have they done anything that makes them worthy of getting stock or have they always been dead weight?

Just being around a long time isn’t something worth rewarding IMHO. If they did something / a lot of effort early on, but are now going off the edge then that would be a different story.