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Know the Reasons for Executive Bonus Plan

Know the Reasons for Executive Bonus Plan

Working in a diverse environment and dealing with different kind of people can be difficult for the employers sometimes. To be a good employer, there is a chance where the employees can be happy with the employer and give their best input for the growth of the company. Everyone connected with the company works for one primary reason and that is the salary. If the salary increases according to their efforts, they prefer to stay and work happily. It is always wise to invest in the employees because they play as the main asset for the company and many of the employers fail to understand that. If you are an employer who wishes to do something for your employees then you have to build a proper understanding and need of executive bonus plan


Executive bonus plan works as a premium for the employer where he/she is allowed to cut down necessary expenses from the budget of the company to pay the employee’s salary or compensation. According to the Section 162, employers are able to take out the expenses to treat the employee with their efforts and rewards. Here is an explanation why the executive bonus plan is needed and how it works. 


Motivates the Employees 

When the employers have to motivate the executives of the company, the bonus plan works for them in this situation. The insurance policy and the death benefits are always beneficial for the employees and work as the main source of income after their retirement. It is added to the retirement plan which gets deducted from the monthly salary of the employee. It adds to the special treatment for the employee as being a part of the organization and playing the role of contributing to the success of the company as well. 


Distribution among Employees

If there is a bonus earned by the employers that are distributed among the employees as well. It gets deducted by the employer and the employee have to pay the tax on it when he/she receives it in terms of the salary. The only reason for the deduction for the employer is due to the compensation and nothing else. The employer is able to design it however it chooses to do it. Sometimes, the employers provide the bonus plan when the employee is able to reach the goals and able to reach the targets on time. If the employee is not able to reach the target, then he/she does not get the bonus. It can completely depend upon the employer how the path for bonus plan works. 


However, the bonus plan can work as an advantage for the company and can be rewarding for the employees to perform better. The employees are able to work more efficiently, prove the talent and are able to manage the time as well when the rewards are provided for their efforts. 


How does Executive Bonus Plan form?


It is a major decision and expenditure by the employer when it comes to the compensation of the employees. The board of directors has to decide the bonus plan and establish it in order to flow in the company. There needs to be a written approval from the board members for the sustenance of the executive bonus plan. The written content involves:

  • Name of participants
  • Mention additional compensation especially as “bonus” 
  • Identification of each participant

There needs to be an attorney who can draft the written consent and every board member has to sign on it for the authentication and further proceedings in the company. 


Making the best for the employees may be thought by fewer companies nowadays but if they think about their employee's compensations and renew it after a while, it can help them retain to the company and bring growth eventually. The older the employee, the better the service of the company gets over the period of time. 


Retention is a big problem nowadays because of the advancement in technology. Employees tend to leave the organization as soon as they get another attractive opportunity. To help the employees stay with your company, apply the executive bonus plan and you will be able to see the change in the earning of the company. 


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