Finding the best ways to both reward and retain employees is a key focus for most modern businesses. Whether you’ve just had an excellent year in sales or you’ve had an employee that has outperformed expectations, finding the ideal way to compensate going above and beyond doesn’t have to be complicated. With an executive bonus plan, it’s possible to have a clear and effective way to provide rewards with no off-the-cuff processes or decisions required.
Why use an executive bonus plan? Here’s why a solid bonus scheme is an ideal way to reward key employees within your business:
Fairness and Transparency
One of the most significant benefits of an executive bonus plan is the transparency and fairness to individual employees and staff members. Many benefits require a one size fits all approach, meaning if you provide a benefit for one employee you have to provide it for all employees. With an Executive Bonus, you’re able to provide it to one specific employee and tailor it as a reward for their performance.
Reward Plus Retention
Most employers want to reward their high performers. Business owners know without them they wouldn’t or couldn’t grow. Many default to a standard bonus – here’s “X%” of your salary as a bonus, valued employee. That’s a great plan – until your competitor offers a higher percentage or a large signing bonus. When structured as an executive bonus, the money has a retention component to it. It requires them to be with you for 10 years (or whatever you choose) to fully realize it. In that way, it functions as a sort of deferred compensation plan. It both rewards and helps retain your best talent.
One of the top benefits business owners are looking for in a benefit plan is a tax deduction. While most standard benefits provide this, there are some that do not. Since an executive bonus is structured as a payment to the employee the employer gets to realize a present-day tax deduction.
Protection for the Employee’s Family and Future
While the cash is deferred in an executive bonus – in order to help retain your best talent – you are offering present-day protection for that employee’s family. Should something happen to them your contributions to the plan produce a significant benefit payable on death. For example, you may be able to provide immediate protection to your employee’s family of $1,500,000 while providing a bonus of $350,000 in 10 years. Meanwhile, your contributions to the plan are fully tax-deductible.
How Do I Implement an Executive Bonus Plan?
If you’re thinking of that key employee that you just don’t think you could live without, let’s work together on an executive bonus plan that would keep them with you for the long term. At Congevity we have extensive experience in business planning, and we can support you in creating the right executive bonus plan to meet your goals. So when rewarding great employees and retaining them long-term it is important to consider the executive bonus as a strategy.