Compensating Your Key Employees

Quick Summary
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

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 and Deferred Compensation

Providing incentive compensation and deferred compensation can give your business more flexibility in rewarding key employees.

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.

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.

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.

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.
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