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Good employees are hard to find, particularly in the construction industry. If your business has struggled to attract and retain top talent, a nonqualified deferred compensation plan (“NQDC plan”) may be the tool you have been missing.
Compensation packages in the construction industry typically combine a relatively low rate of base pay with substantial project-based commissions or bonuses. While effective at rewarding productive employees upon completion of key projects, such compensation packages leave the door open to poaching by competitors once annual bonuses have been paid.
Adding a NQDC plan would enable the employer to introduce an additional element to the compensation package: time. For example, instead of offering a $50,000 annual cash bonus, a NQDC plan might offer a $200,000 cash bonus that is payable only if the employee remains with the employer for four years. Making a significant amount of compensation dependent on future services encourages retention and incentivizes employees to take the long-term financial success of the company into account.
A NQDC plan can also be designed to include “phantom equity” features that mimic the economic impact of business ownership. A phantom equity plan measures benefits not in terms of cash, but rather in terms of hypothetical shares that mirror the value of the enterprise or even the employee’s specific division. As the company grows, so does the value of the participant’s account.
Reach out to a member of the Schneider Downs Retirement Solutions team to learn more about how your company might benefit from a custom-tailored NQDC plan.
Learn more about the Voluntary Disclosure Program. ...
Learn more about the Voluntary Disclosure Program. ...
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