BENEFITS

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  • How to Compensate Employees: Base Pay & Beyond

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    Creative Ways to Reward and Compensate Employees

    Flexibility is important—for employer and employee. As a startup company, you might want to get creative in finding ways to compensate your employees.

    Deferred compensation
    One way for cash-strapped owners of young businesses to handle lean times is to get employees to agree to deferred compensation. It could be in the form of back pay once the business reaches a profit. A key advantage of deferred compensation plans is the opportunity for employees to defer some taxes on current income. This can be a major plus for highly compensated executives.

    Stock options
    Stock options can be an important tool to help retain, attract and motivate employees. Incentive stock options give special tax benefits to employees. Shares must be held for at least one year and can only be sold or given away after two years. Stock option plans must be well documented and checked to ensure everything is done legally.

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    Game Plan

    • Speak with a consultant to make sure you understand the rules and restrictions as well as the advantages of using stock options as part of your compensation and benefits package, and to learn more about deferred compensation.
    • Speak with other business owners to learn about their experiences in this area of employee compensation.
    • Learn more about choosing an employee stock plan.