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What are the typical components of compensating an executive?

On Behalf of | Aug 5, 2021 | Executive Employment

Executive compensation is typically much more than an annual salary. High-level employees in New Jersey do receive base salaries, but there is much more that makes up an executive compensation package. Here’s a closer look at the typical components of compensating an executive.

Annual performance-based incentives

Each year, many companies implement annual strategies and goals to bookmark their performance. A performance-based incentive is a way to reward executives who help a company reach or exceed its annual goals.

Long-term performance-based incentives

Companies can also reward executives through long-term compensation. This form of executive compensation typically comes in the form of:

  • Company stock
  • Restricted stock
  • Stock options
  • Performance-vested stocks and options

Executive benefits

As many employees do, executives also receive statutory benefits like Medicare and Social Security contributions. There are also other typical company benefits, such as life insurance and health insurance. Sometimes, executives receive benefits through special retirement plans.

Perks

Otherwise known as executive perquisites, perks are other ways for executives to earn compensation in their respective roles. These perks are typically only available to executives. Examples of perquisites to consider for an executive can include an exclusive parking space, company vehicles for personal travel and a security team.

Contingent payments

Many executive compensation packages also include severance pay if an involuntary termination should take place. This kind of payment often gets included in executive agreements for someone who left their former job to enter this executive role.

An executive is one of the most important roles within a company. If you want a new executive to come to your company, it’s important to offer an enticing compensation package.

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