Compensation advisory

Attracting, retaining, and incentivizing top talent is becoming increasingly challenging in today’s landscape. Today, the focal point of many business discussions revolves around the talent that leads and supports organizations, underscoring the indispensable value of Compensation Advisory Services that are tailored to your needs.

A well-designed compensation program including base salary and employee incentives [short-term incentive plans (STIP) and long-term incentive plans (LTIP)] will assist you in incentivizing your key talent to achieve corporate and ownership objectives while ensuring market competitiveness. For private businesses that are highly reliant on talent, employee incentive plans are powerful tools that are becoming more prevalent and critical to attract and retain talent. A tailored and thoughtful incentive plan will inspire your team and benefit your family intergenerationally by strengthening your succession plan and enable you to achieve your personal and familial goals.

At Richter, we understand that as private and often family-owned business owners, you may have concerns around employee share ownership or similar plans including phantom equity, stock appreciation rights (SAR), employee-ownership trust, stock option plans or otherwise. When designing employee incentive plans, in order to minimize your concerns, we design plans that consider:

Complex family dynamics
Multiple share structures and entities
Limited liquidity for the shares
Current and future tax and estate planning
Tax optimization / efficiency
Varying dividends
Related party transactions and conflicts of interest

Our expertise working with family and private businesses allows us to navigate the complexity and delicate nuances of the private enterprise sector.

When establishing an attractive and competitive compensation framework, there are certain best practices to follow, such as:

base salaries benchmarked to comparable positions, industries and level of employee contribution to the organization;
expressing short-term incentive plans (STIP) as a percentage of base salary based on both corporate and personal objectives and key results, or similar; and
developing long-term incentive plans (LTIP) to foster value creation and sharing with employees through an employee equity, equity-like or long-term bonus program.

WHY INCENTIVIZE WITH A LONG-TERM PLAN?

There are many reasons to support building long-term incentive programs into your company’s long-term strategic plan. Chief among them, it helps attract and retain top talent, fosters a longer-term mindset in employees, creates a sense of ownership and aligns ownership, corporate and employee objectives.

Considering your size and success in the market, your company may also be competing with public or institutionally backed firms for top talent. Many of these firms offer employee equity programs or other long-term incentive plans (LTIP) to key leaders. Rewarding, motivating, and retaining your company’s leadership over the long term by aligning their interests with corporate objectives will not only help retain talent, but it will also ultimately benefit the company. This strategy encourages these leaders to think like owners – nurturing their entrepreneurial spirit, encouraging long-term collaboration, and creating an environment which fosters long-term value creation.

To assess value creation and craft a plan to drive results, our team has deep expertise in business valuation and understands how to identify and measure key value drivers to align interests and propel your business to the next level.

ALIGNING COMPENSATION WITH BUSINESS OBJECTIVES

As a business owner, it is important to consider and document your personal, family and business objectives. From here, you will be well-positioned to create an employee incentive program and determine the key terms and conditions for the plan(s). Considerations are many and can include, but are not limited to: determining plan participants, timing to earn rewards, basis for measuring value, triggering events, payout terms, investment hurdle rates, and employee equity to be granted, among others.

KEY PILLARS OF AN EFFECTIVE LONG-TERM INCENTIVE PLAN

Calculation – How much and on what basis?

Vesting – When earned?

Payout – When paid?

HOW RICHTER CAN HELP YOU

Richter’s Compensation Advisory team provides professional guidance and a competitive advantage in building employee incentive programs and overall compensation packages. Our team of experienced advisors can assist you to

Understand and document your compensation philosophy and assess the status quo – what is working and what could be improved?
Conduct compensation benchmarking
Design and implement salary structures
Design and execute a short-term incentive plan that aligns employee and corporate objectives, fosters focused goal setting, monitors and rewards results.
Design and execute a long-term incentive plan to fit your needs, including:
- key business terms
- legal and tax structure
- stakeholder management (and helping foster ‘buy-in’ where needed)
- valuation and financial modelling to illustrate the value of the long-term incentive plan over time
- collaboration with legal counsel to formalize the plan
- reporting requirements
Design and negotiate – employee equity investment opportunities.
Provide independent advice in respect of related party compensation (ex. family member) or where similar conflicts of interests may exist.