Key Person Total Rewards for Small & Mid-Size Businesses (Human Resources & Employee Benefits)
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Build, Engage & Reward Key Talent In Your Organization to Help Keep Great People on Your Team!
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Key Person Total Rewards for Small & Mid-Size Businesses (Human Resources & Employee Benefits)
- 1. Key Person Total Rewards For Small & Mid-Sized Businesses HR Foundations Build, Engage & Reward
- 3. Agenda Problems with Rewards in Smaller Organizations 3 Solutions for Linking Rewards with Results Elements of a Total Compensation Portfolio Short Term vs Long Term Rewards Case Study- Long Term Incentives Typical Reward Design Process Questions & Next Steps
- 4. 5 Top Problems with Key Person Rewards
- 5. Value of a key person How do you fairly value a person’s role and contribution in the company?
- 6. Problems- Bonus is Incentive Plan Broken Seen as entitlement, No “line of sight,” or Formula doesn’t match individual contribution or results
- 7. Variable Profits You don’t want a plan with a guaranteed incentive payout, that costs more than you can afford
- 8. Problem: Retain Ownership You may want to reward and retain key people, without giving up stock
- 9. Problem: 401K Maxed Maxed out Key people contribute to 401K plan limits, so extra compensation is paid out with a large tax bill
- 10. The Solution- Reward Key People To share pay and profits based on their role and their results For building long-term business value (not just this year’s profits) To think like an owner (without giving away shares) To stay with the company and put their heads and hearts into building it with you
- 11. 4 Compensation Goals Reflect Internal Role 01 Market Competitive 02 Aligned to Business Goals 03 Drive Ownership Thinking 04
- 12. 4 Elements of Total Compensation Benefits Membership & Loyalty Change in Pay Pay for Performance Incentives Results Gain-sharing Base Pay Role & Responsibility Short Term & Long Term
- 13. Promise: Pay for Performance When managers do the Right Things that produce profits and grow the long- term business value, plan shares the gain
- 14. Promise- Team Key people feel they're rewarded to work with you together to achieve the business goals
- 15. Promise- Ownership thinking People engage their heads and hearts, and make decisions that build the business
- 16. Short Term vs Long Term Short Term • Pay for Annual Results Long term • Pay for Building Value
- 17. Benefit: Long Term Incentive Plans Varies • Annual funding based on profit levels • Adjusted based on individual results Retain • Focuses on long term value creation • “Golden handcuffs” – vested payout Taxes • Tax deferred instead of W2 payout • Additional retirement vehicle Owner • Defer compensation for stock transfer • Provide fund for owners retirement
- 19. CASE STUDY: Mr. Client, Age 45, Ultra Preferred, Non Tobacco, Whole Life Legacy 10 Pay, Face Amount $230,717 Year Age Annual Premium Annual Retirement Income Cash Value Death Benefit 1 46 10,000 3,531 230,787 5 50 10,000 40,853 237,304 10 55 10,000 104,134 253,936 15 60 141,174 296,784 20 65 23,061 165,928 304,226 21 66 23,061 151,656 270,908 22 67 23,061 136,301 238,103 23 68 23,061 120,279 218,690 24 69 23,061 103,456 198,444 25 70 23,061 85,784 177,297 26 71 23,061 67,220 155,239 27 72 23,061 47,717 132,229 28 73 23,061 27,225 108,284 29 74 23,061 5,719 85,060 35 80 16,675 89,443 40 85 26,491 91,744 45 90 34,020 91,221 50 95 34,316 81,297 55 100 42,831 42,831 MassMutual Life Insurance Company Thomas R. Zugger, CLU, ChFC, CLTC Robert DiGiore *Dividends are neither estimates nor guaranteed, but are based on our 2016 dividend scale. Dividends in the future may be lower or higher, depending on the company's actual experience.
- 20. Reward Design Process Total Reward Compensation Plan Business Plan Identify what creates business value Dash- boards Track Review Improve Business Metrics Roles Clarify roles responsibility, accountability expected performance Targets Establish and value reward targets (base pay, incentives) Design Reward results, reduce tax, retain value, plan for transition Model Forecast payouts and future values to ensure meets goals Investments Select investment vehicle and plan design
- 21. Complimentary Total Rewards Evaluation Schedule Consultation Diana & Robert Evaluation Identify your needs Outline Game Plan Project timeline and investment Design Phase Custom Rewards Plan 01 02 03 04 Total Reward Evaluation Evaluate your current key people, plans, business and owner long term goals Game Plan Proposal Specific detailed outline of timeline and investment to create & implement your Total Rewards Plan
Editor's Notes
- PAY FAIRLY- INTERNAL PAY ENOUGH TO RETAIN - MARKET 4 TYPES OF PAY– MOSTPERCEIVED REWARD LINK CONTRIBUTION & PERFORMANCE TO PAYOUT REWARD LOYALTY & RESULTS DRIVE LONG TERM OWNERSHIP THINKING