Deferred compensation is a popular topic among higher wage earners today. Expect this to be a growing trend as taxes continue to inch higher and higher. If you combine that with longer life expectancy, the low interest rate environment and inflation there are many reasons why business owners and executives need to be saving more. Examples of deferred compensation include company-provided pensions, retirement plans and employee stock options. The chief benefit of most deferred compensation is the deferral of tax until the employee receives the money. This causes a reduction of taxation during working years where incomes traditionally could be higher.
“Deferred compensation” is largely viewed as an employee receiving wages after they have earned them. This allows employers to pick and choose which employees they provide deferred compensation to, rather than being forced to provide the same level of compensation to all. Also known as “Golden Handcuffs”, companies can even increase productivity, retention and employee morale without spending a dime until the transfer of said proceeds at a predetermined point in the future.