best long-term incentive plan design<\/u><\/a> that suits your company.<\/p>\n\n\n\nHow does an LTIP work?<\/b><\/h2>\n\n\n\n
An LTIP works by rewarding employees (usually senior employees) with cash or shares of company stock (see more here) for meeting specific goals. The goals are usually long-term, running for 3-5 years to stimulate ongoing progress rather than a-few-months objectives.<\/p>\n\n\n\n
Unlike short-term incentives, LITPs have a built-in retention feature to encourage employees to stick around to receive long-term awards.<\/p>\n\n\n\n
Who can get LTIPs?<\/b><\/h2>\n\n\n\n
In theory, all employees can be eligible, but in practice LTIPs are most often reserved for executive- or officer-level and above whether it\u2019s a private or public company. However, because of their liquidity, private companies\u2019 long-term award opportunities for their key employees are about 50% less than public companies.<\/p>\n\n\n\n
Why do companies use LTIPs?<\/b><\/h2>\n\n\n\n
LTIPs are a win-win deferred compensation strategy for both employers and employees:<\/p>\n\n\n\n
\u2013 Focus on long-term profits\/benefits<\/strong>: Short-term profits are great but can come at a cost. Oftentimes, they come at the expense of customer relationships and are unsustainable.<\/p>\n\n\n\nLTIPs, however, can align your company\u2019s interests with the interests of your employees over a long period of time. They\u2019re not only trying to hit targets for this year, but also moving the company forward to sustain its growth in the long run.<\/p>\n\n\n\n
\u2013 Encourage employees to remain with the company<\/strong>. With LTIPs, you show your employees the most important areas to effect continuous growth and their long-term pay holds them accountable for implementing it over the next couple of years.<\/p>\n\n\n\n\u2013 Save time and money on hiring senior employees<\/strong>. Employee turnover can be an unnecessary black hole for your profits \u2013 according to studies when a business replaces a salaried employee, it costs six to nine months\u2019 salary, on average, to train their replacement.<\/p>\n\n\n\nThis is more of an issue these days when most employees only remain with a company for an average of two years.<\/p>\n\n\n\n
Talk to us today to establish an LTIP that fits your business\u2019s interests and philosophy.<\/b><\/p>\n\n\n
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