Compensating Your Key Employees
The success of your business most likely depends on a small group of key employees. Retaining them is vitally important. The most common and effective ways to do this include stock options and other forms of additional—and often deferred—compensation.
Stock options are a popular way to provide additional compensation for key employees, and you can tie these options to the business’s success. There are two forms of stock options:
- Incentive stock options
- Non-qualified stock options
Incentive and Deferred Compensation
Providing incentive compensation and deferred compensation can give your business more flexibility in rewarding key employees.
- Incentive programs
- Deferred compensation
- Corporate-owned life insurance
Arranging Equity Participation
Employee retention is often tied to some form of equity participation. However, there are many ways to provide this additional compensation, typically in a deferred manner. Actual employee ownership of shares is just one approach. Another is to share in the appreciation of the company’s stock value without actually owning stock.
- Stock options
- Phantom stock/stock appreciation rights
- Other approaches to stock ownership
Supplemental Executive Retirement Plans
A supplemental executive retirement plan (SERP) can be a highly effective way to provide additional compensation for key employees and persuade them to remain with the company longer.
- Supplemental retirement income provided through a special life insurance policy
- Numerous benefits
- Defined benefit or defined contribution SERPs
Golden Parachutes & Golden Parachute Tax
Golden parachutes are created to protect executives in the event that a public company is sold, and they either lose their job or their responsibilities are substantially reduced.
- Parachute payment triggers
- Elements of golden parachute payments
- How to protect against tax penalties
Securing Non-Compete Agreements
Protect your business by having all key employees sign a non-compete agreement. This will restrict any employees who leave the firm from competing against your business for a period of time and possibly over a particular geographic area.
- Be careful and thorough
- Consult with an expert in employment law