Written by Connor Harrison
October 16, 2018
In the war for talent, organizations are finding new ways to retain longtime employees. Short-term incentives go a long way to keep workers engaged year-to-year, but as employees move up in an organization’s hierarchy, it’s necessary to consider offering long-term incentive plans (LTIPs).
We'll discuss non-equity based plans and explore some of the standard metrics and measurement methods that dictate payouts.
Non-equity-based plans typically reward employees with cash rather than company stock, and the rewards are not related to stock performance. These plans are meant to reward longer-term organizational performance, usually over three to five years.
Like equity-based LTIPs, these plans are strong retention tools due to multi-year or longer-term reward payouts. But since these plans are not tied to stock performance, employees usually have more control over payouts.
Non-equity based plans can take several forms, such as:
Here are some of the common drawbacks that your organization should be aware of when considering a non-equity based plan:
Long-term incentive plans motivate employees to consider your organization’s growth over time and avoid focusing too much on short-term financial success, but you may find that it only makes sense for a handful of individuals.
Download our white paper to further understand how organizations across the country are using market data, internal analytics, and strategic communication to establish an equitable pay structure.