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Key Employee Compensation
I have a very valuable key employee who has been with me for over 10 years. Each year he has been with me, I have given him a raise. Now, I prefer to reward him some other way other than money. I own my Sub S corporation 100%. Can someone give guidance as to how to do this the right way? By the way, I have a son who I am training to take over for me someday.
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2 Answers
Hi Robert;
We created a performance appraisal process for small to medium companies. Our system allows the staff member to create their own measurable goals with you concurrence. It is a win/win for each of you. 'as for as offering him a reward for a job well done, through out the year, a pat on the back goes a long way, in addition, small gifts like a free dinner and a nice restaurant, movie or show tickets, etc. The key is to create measurable goals that the employee knows that it is up to him as to how well he will do. . Our process requires you to review the goals every quarter to see if he is on track. I hope this helps.
Robert:
There are a number of things you can do around long term incentives ranging from non qualified defered compensation arrangements to actually giving this person an opportunity to be a minority shareholder. It sounds like it is your intentto have your son take over the business, but that wouldn't prevent you from releasing some of the stock to key staff.
I have designed a number of longer term plans that involve performance over multiple year periods to "vest".
I try to get away from "annuity" style compensation plans for key people. They are too short term...
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