The Best Ways of Incentivizing Your Staff

Making sure that your employees are happy is one way of ensuring that your business thrives and prospers. Happy employees are more productive and willing to work harder for you. Setting goals that are realistic, and that employees understand, is a crucial part of any incentive program. If you want to reward your employees financially, there are a few really good ways to do it.

Retirement Matching Contributions

Retirement matching contributions are one way of rewarding your employees for good performance. A retirement account match is when you contribute money towards your employees’ retirement plan. For qualified accounts, like 401(k) plans, you must match all employee accounts the same.

For example, if you offer an employee a $1 match for every $1 he contributes to his retirement fund, you must also offer the same $1 match to every employee. However, some accounts are considered “non-qualified” and you can offer a paid bonus to select employees. This is an ideal way to offer incentives to employees because you can be selective about who receives a bonus and who doesn’t. The bonus may be set up as a direct payment to the employee or you can pay it to a brokerage account where the employee has limited control over the funds.

Normally, an agreement is signed between you and the employee that stipulates what the bonus money may be used for. If you want to motivate your employees to stay with you for a long time, you can structure the agreement so that the employee has full trading authority over the funds but cannot remove them for a set number of years.

Non-Qualified Stock Options

A stock option is a right, but not the obligation, to buy or sell a specific number of shares of stock for a predetermined price and for a predetermined amount of time. For example, a stock option may give you the right to purchase 1,000 shares of Microsoft for $10 per share for the next 3 months. Stock options that are given as a bonus allow an employee to benefit from the increase in the share price of your company if it is publicly traded.
The employee must pay income tax on the difference between the stock price and the strike price at the time the option is exercised.

Incentive Stock Options

Incentive stock options are more of a long-term investment. While non-qualified stock options benefit an employee if you’re going to issue an IPO and expect your stock to do well “out of the gate,” incentive stock options are meant to be more of a long-term investment. Typically, these stock options are held for more than a year from the date the option is exercised. The shares exercised by the options holder also must be held for more than two years from the date of issue of the stock option.

This gives incentive stock options a tax benefit in that they will always be taxed as a long-term capital gain – a tax rate that is lower than the income tax paid on non-qualified stock options.

Employee stock options can also be “restricted.” This means that even though the individual has the right to exercise the option, he may be restricted from doing so prior to a specific date or before a company has achieved a certain benchmark or milestone. This gives further incentive for employees to perform well so that the company’s share price increases.

In some cases, the employee does not have direct control over the share price of the company because she doesn’t have control over any aspect of production. Even still, stock options can help to energize your workforce and motivate everyone to work together so that the company does well.

About the Author: Guest post by Elizabeth Goldman, on behalf of Sunbird cfd Brokers and currency trading specialists. Home to the advanced MetaTrader platform (see the metatrader 4 user guide). All views and opinions belong to the writer and do not necessarily represent Sunbird FX.