How offering stock, RSUs and deferred compensation plans can help 

Did you know that in 2021, half of employees under the age of 35 rated equity compensation as “important” when thinking about switching jobs? And that restricted stock units (RSUs) have now become the  most common type of this kind of equity compensation? As a business owner, offering stock is becoming  a must-have on the list of things to offer potential new employees, as well as in retaining valuable team  members. Here’s what to consider.  


First, equity compensation is not a cash vehicle. As a business owner, you outlay no cash to offer this  incentive or compensation. This can be an upside for startups that may be cash-strapped. You may want  to put cash into another part of the company, like a new growth initiative or capital expenditure that will  improve your position long term, but need to entice talented staff to stay the course while the yields of  your investments take shape.  


There are performance shares, stock options and RSUs. Performance shares are awarded in conjunction  with meeting benchmarks or performance targets. They are a great way to incentivize or sweeten the deal  with executives who have specific metrics to meet, and can supplement cash incentives or be used on  their own.  

Regular stock options are regular shares of your stock that have an agreed upon “strike price.” You set a  purchase price in advance, and your employee has the option to exercise that right at any time to buy  stock. These require a vesting period so that employees are incentivized to stay with your company longer  term.  

Among 325 companies that were surveyed, 72% used RSUs in their executive compensation programs.  RSUs usually have a vesting schedule, but as soon as they vest, employees can do whatever they like with  them – just as if they bought them like any other stock.  


Stock options  

Employees don’t have to exercise the right to buy the shares  

Encourages employees to stick with a company for a longer term with a vesting schedule  

Negotiating an optimal strike price keeps employees engaged  

Employees can sell or transfer the stock when they purchase the stock at vesting time  You can build in an expiration date so that the stock has to be purchased by a certain point in time  


Less risk for employees  

RSUs are always worth something – no strike price to consider 

Most used type of equity compensation  

Worth full value at time of vesting  

Don’t have to pay dividends during vesting period  

Save on costs around custody and proxy voting  

Performance shares  

Granted when a milestone is met  

Great to incentivize employees as an add-on or standalone  

Usually are not outright shares of stock  

Link stock to long-term performance of company  

Create strong alignment between employees and the performance of the company  Investor-friendly  


Deferred compensation is another way to entice executives. Simply put, part of your employee’s pay is  held now for disbursement later. If highly compensated and over 50, an employee can take maximum  catch-up contributions and substantially reduce their tax burden. Income tax is also deferred for the  employee until compensation is paid out – which could be when they retire. If they’re in a lower tax  bracket at retirement, they can potentially save on taxes.  


Another tool in the executive compensation toolbox  

Can result in tax savings for the employee  

Can incentivize highly compensated employees  

As with all types of compensation packages, there is no one-size-fits-all. Determine your goals, evaluate  your options and talk to your advisor about structuring the right plans for your company.  


Here are a few other perks some of the big guys offer. While these may not be applicable to your  business, they might spark some ideas in this tight labor market.  

“Unlimited” vacation days  

Netflix, Oracle and LinkedIn are just a few that offer unlimited vacation days. While it may evoke visions of  employees slacking off, the opposite is true. Employees remain accountable to company goals as they are  still assessed on meeting their performance targets.  

Focus on family – and furry friends  

With the “Great Resignation” in the wake of COVID-19 in 2021, more people started to reassess priorities.  Family, friends and, yes, even the furry ones began to take center stage. When you think about perks,  think about how they could extend to your workforce’s entire family – from dependents to pups. We’re  talking childcare, online camps; pet care or pet health insurance; bring your child, grandma or pet to work  days – even if it’s just on Zoom; elder care support, activities or meal services; fun meals and recipes the 

whole family can cook together; and mental health resources. All of these can make your employees feel  like you care and could increase loyalty.  


Maintaining self-care, mental health and fitness has become more of a challenge with employees working  from home over the past two years. Company-sponsored Zoom yoga or HIIT workouts, self-care boxes  filled with anything from healthy snacks to luxurious hand lotion that are shipped to your staff’s homes,  and offering mental health resources through an employee assistance program or other service all go a  long way toward letting employees know you see them and hear them. Financial wellness programs, too,  could help elevate your company’s benefit offering. 


As you can see, recruiting and retention strategies take some thought and planning. Here are some things  to think about for 2022.  

  • Take a look at your compensation packages – are they in line with the current market?  Consider adding nonmonetary perks like flex time or flexible vacation days.  Talk to your advisor about different compensation options.  



Material created by Raymond James for use by its advisors. The information contained herein has been  obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or  complete. Raymond James is not affiliated with any other entity listed herein. © 2022 Raymond James  Financial Services, Inc., member FINRA/SIPC. 21-BDMKT-5251 EG 2/22