Executive Benefits Trends: Discretionary Company Contributions
In a complex corporate environment, the use of discretionary company contributions to reward key employees is on the rise. Here’s why.
Each year the Newport/PLANSPONSOR Nonqualified Deferred Compensation (NQDC) Survey examines trends and patterns in executive compensation. This year’s 2022 Newport/PLANSPONSOR NQDC Survey reached out to PLANSPONSOR subscribers, Newport clients and prospects, Fortune 1000 companies and other large for-profit and tax-exempt companies for their input.
One of several noteworthy trends in NQDC is an increase in discretionary company contributions. A powerful driver of this increase is, no doubt, the competitive employment landscape and the need by companies both to attract top talent to their most critical positions and then to keep those valued employees for the continuity and continued success of the organization. This all comes down to perhaps the most widely-used phrase in the discussion of executive benefits, and yet it remains more relevant and timely than ever: Recruit and Retain.
When it comes to recruiting and retaining employees who can be costly and challenging to replace, NQDC can be a helpful and strategic tool for companies.
The Numbers Tell the Story
More Reasons Why the Use of Discretionary Company Contributions Is On the Rise
The highly competitive job market and the challenging economy are motivating many companies to stabilize their leadership. Another reason the use of discretionary company contributions is on the increase may be how much their simplicity stands out in today’s complicated times. Easy to implement and typically with no requirement for a plan amendment, discretionary company contributions can be used even when equity awards are unavailable.
Inherently flexible, discretionary company contributions can be a flat dollar amount or can be tied to a performance standard. Because their award can be customized, they can incentivize prospects to join the team or inspire loyalty without requiring the company commit cash or equity immediately. And with no requirement for discrimination testing, they can be offered both to current or new-hire executives.
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