Tax Law Blog
You have a reason to grow your business—you’ll make more money. You also have a reason to stick around—the proverbial pot of gold at the end of the rainbow. But what about your key employees? You should consider giving them the same incentives.
Incentive strategies can be designed to fit your employees, your business and your industry. A good approach is to ensure that your bonus programs align your key employees’ incentives with your short-term and long-term goals. Short-term incentives are often provided through an annual bonus program. The bonuses may be discretionary, profit-sharing or earned based on annual performance targets. Long-term incentives are often provided through bonuses that are earned over three to five years based on key employees meeting long-term performance targets and other goals. Performance targets should be designed to fit your strategic plan, particularly the areas over which each key employee is responsible.
Another approach is to design a “top hat” deferred compensation program to encourage your employees to work hard toward your goals over the long-term. For example, your business could use such a program to grant an extra retirement benefit to a key employee in exchange for the employee remaining with you through retirement or helping you meet other goals, such as successfully selling your business. An employee can also be given stock, stock options and even “synthetic equity” in your company to encourage them to help you grow your business and its return on investment. Examples include restricted stock plans, stock option plans, phantom stock plans, stock appreciation rights plans and “omnibus” plans.
Contact Joel Farrar at (517) 371-8305 if you would like to investigate your options further.
ShareholderJoel Farrar is a business lawyer with specialties in mergers and acquisitions (M&A), start-up law, and executive compensation planning. Joel particularly enjoys helping entrepreneurs with start-up businesses and fundraising.
