Employee Deferred Compensation

Employee compensation can be a critical factor in attracting and retaining quality employees. When one thinks of compensation, one immediately thinks of salaries and the minimum wage. Creative and knowledgeable business owners offer a complete package of compensation in addition to merely salary. If you are considering expanding your business by offering franchises, you may wish to explore the various “fringe benefits” that you can offer employees in addition to their salary. This way you can be more competitive when trying to attract key employees and also potentially defer compensation into the future when your business cash flow is established and your firm is profitable.

Profit Sharing Plans
Company profit sharing plans offer workers the opportunity to increase their earnings over and above the minimum wage. The way a profit sharing plan works is simple. Based on the salary level of the employee, the employer makes a defined contribution into the plan every year and allocates a percentage to each employee. The amount of the contribution is based on the profitability of the business.

Stock Options
If you have incorporated your business, you probably have thousands of shares of your company’s stock in what is called “the treasury”. You can offer employees the option to purchase treasury stock at a fixed price, called a stock option. An employee may have accumulated options to purchase 10,000 shares of your stock for say $10 each. If you have since taken your company public, the stock may be trading at $50, making their options worth $500,000 and liquid to cash in or to use as collateral for a tax-free loan. Either way, the option of ownership of the company makes employees feel like they are partners and not just disposable workers.

Retirement Savings Plans
There are many types of retirement plans that you can offer employees as an incentive to stay with your company long-term. 401 (k)’s, IRA’s and health savings accounts that are vested with the employer until the employee has worked at the company for a period of years can add to an employee’s overall job satisfaction and act as an incentive for employees to stay with your firm.

Mario L. Herman is an international franchise attorney that can advise you on the type of deferred benefit plans you may want to offer your employees. This can help a franchise owner reduce salary costs and attract and retain quality employees.