Cliff vesting is commonly used in employee stock option plans and pension plans to attract and retain employees. Under this arrangement, employees do not earn any rights to assets until they have completed a specified period, known as the cliff period, which is typically one to four years. After this initial period, a fixed percentage of the benefits become vested immediately, after which the employees will continue to earn rights to the remaining benefits incrementally over time. This approach incentivizes employees to stay with a company longer to benefit from their full potential compensation package.