In today’s economy, basic employee benefits are critical to recruiting, rewarding and retaining top talent, but business owners should also consider: “How do I incent my employees to contribute to the company’s bottom line? How can I ensure that there is a return on my benefits investment?”
What many business owners don’t realize is that it is possible to take employee benefits one step further, to help incent key employees – those that have the most impact on the prosperity of the business – to work more productively. And when employees work more productively, it pays off for the business as well.
There are many ways to design a key employee benefit package, also known as an executive benefit program. Such programs allow an employer to offer additional benefits to a select group of employees because they are not subject to the same rules as plans that cover all or most employees, like a qualified 401(k) plan. The important thing to understand is that people will react and perform based on how the incentive is designed. Successful programs are clearly communicated, tied to business outcomes and large enough to be meaningful, which typically means 15 percent or more of income.
When seeking to incent key employees, business owners should consider:
Bonus plans: provide the employee with additional compensation which can be used to offset the premiums for life, disability, long term care or other benefits.
Deferred compensation plan: allows the employee to defer current income to a later date in order to enjoy tax-deferred growth on that money.
Supplemental executive retirement plans (SERP): a promise made by the company to pay a certain amount, based on a vesting schedule, at a future point in time, as long as the employee stays with the company.
Not only do these plans give an employer a competitive edge in recruiting talent, they can also offer long-term performance incentives and provide significant motivation for key employees to stay with an organization.
By linking compensation to those activities and accomplishments with a direct impact on the bottom line, business owners can incent their employees to perform at a higher level, making it a win-win for all involved.
