The employees are the most valuable asset that a company has. It is the goal of every employer to bring in and retain the best employees to enable the company to run and grow into the future. This is why employers are continually finding ways to boost the morale of employees through benefit plans such as 401(k), pension and profit-sharing plans.
However, the most important are the executive employees. Most companies struggle to maintain top leadership. This begs the question, are the standard benefit plans motivating executive employees to remain in a company?
Why The Executive Team is important
The executive team performs a significant role in a company’s future success. These are the individuals that make up the management team responsible for making decisions that affect the bearing of the company. They also manage other employees. They interact with the customers. And in most companies, they are responsible for crucial aspects of a company such as finance, quality control, operations among others. For these reasons, it is paramount that an employer attracts and retains such individuals. One way to do this is through an executive benefit plan.
Executive Benefit Plans
There are various kinds of executive benefit plans. Each is unique in how it rewards executives as it relies on the objectives and goals of the business owner. This means that the executive benefit plan can be aimed at benefiting one executive or a group of employees.
Furthermore, these plans’ benefits to the employee can be current or in the future. The rules to the usually qualified retirement plans do not apply to them. This means they don’t have a contribution limit or discrimination rules. As such, they are very useful in motivating key employees.
Some of the typical executive benefit plans are Executive Bonus Plans, Phantom Stock and Performance Plans, Supplemental Executive Retirement Plans (SERPs), Nonqualified Deferred Compensation (NQDC) plans, Stock Option Plans, Split-Dollar Plans, and Supplemental and Extraordinary Life and Disability Insurance.
Setting Up an Executive Benefit Plan
One crucial consideration to be aware of is whether the business is a C corporation, S corporation or a limited liability corporation (LLC), and other types.
You should also be aware of the implications of the plan concerning the kind of business structure as well as the tax implications brought by the plan to the employee, the company and the owner. Other considerations are:
The financial benchmarks to be modeled when coming up with the plan.
Whether the plan should be linked to the performance of the employees or their compensation.
A vesting schedule
What ensues if the business is sold.
If the employer can reward employees with stock in the business or if the plan should lie on the performance of the company.
The person responsible for monitoring and maintaining the plan so that it is compliant with regulatory standards.
In conclusion, an executive benefit plan will help you attract and retain key employees but before setting one up ensure you meet the regulatory standards.