Non-Cash Compensation
Employee compensation is a complicated issue. Lost in the shuffle of wages, salaries, bonuses and other compensation they receive, many people forget that there is a type of compensation called non-cash compensation. Non-cash compensation is used to attract and retain top talent, motivate and incentivize or reward employees and also to provide a way to pay employees when the company does not have the necessary cash available.
Non-cash compensation is any form of compensation for services provided to an employer that does not involve payment in cash. Examples of non-cash compensation can range from vacations and additional time off to company-issued stock options and other equity-based compensation plans. Other forms of non-cash compensation can include discounted or free company services, appearance awards such as gift baskets and certificates, or gift cards and vouchers.
One of the primary reasons a company might choose to use non-cash compensation is to motivate employees and to incentivize habitual or repeat behavior. For instance, the most obvious form of non-cash compensation is an employee bonus. Many companies offer these bonuses as a form of recognition or incentive for outstanding performance. It is also common for companies to offer extra time off as a means to reward extra hard work throughout a given project or period.
Another popular form of non-cash compensation is equity-based compensation. Equity-based compensation can come in the form of stock options, restricted stock grants and stock appreciation rights. These forms of compensation are not only beneficial to the employees, but the company as well. Making employees part-owners of the company is a great way to motivate them to work hard and to help promote a sense of pride and ownership in their roles.
It is also important to note that non-cash compensation can be used as a way to manage cash flow. Using non-cash compensation, companies can provide an incentive to employees without having to pay for it up-front. For example, providing the promise of a vacation or year-end bonus can be a great way to provide skilled employees with a reason to stay with the company.
Overall, non-cash compensation is a great way to reward and incentivize employees while providing long-term benefits to the company. It is important, however, to make sure to comply with all laws and regulations regarding non-cash compensation. This is especially true with any stock-based compensation plans as there are many laws and regulations that can be involved. Managing a successful non-cash compensation program can not only help to retain and motivate employees, but it can also be a great way to manage cash flow.
