Golden Handcuffs Guide
Tax efficient financial business incentives to retain or recruit key employees and drive performance
Golden Handcuffs Testimonials
If you are looking for an organization that will take the time to listen to your needs, understand the goals you have set for yourself and your organization, followed by a well thought-out plan, then this is the firm you should be talking to.
I'm 100% committed to my business and it's nice to see firms like Langan Financial are equally committed. Top notch group. Five Stars from me!
President of Weidner Construction Services
The Langan Financial Group has been nothing but the best!
Their level of knowledge and dedication to communication and customer service are top notch!
Co-owner of Harrisburg Property Management Group
What Are Golden Handcuffs?
Golden handcuffs, also known as executive compensation packages, are financial incentives designed to retain key employees for a period of time or recruit new ones.
In addition to reducing key employee turnover, golden handcuffs attempt to drive performance and increase company growth.
4 Reasons Why Golden Handcuffs Important
Golden handcuffs can have an incredible benefit to your company, depending on how it is structured. The biggest benefits include:
- Retaining or recruiting key employees
- Retaining knowledge management
- Retaining key relationships
- Drive performance
By retaining or recruiting key employees, you can ensure top talent stays at your organization rather than going to a competitor. In addition, it can minimize turnover, which can cost an organization thousands of dollars in:
- Training costs to get employees onboarded
- Loss of productivity from lack of position filled
- Human Resource hours in reviewing resumes, interviewing, creating benefits packages, etc.
In addition, it helps save organization money through knowledge management. As a person becomes proficient in their position, he or she knows exactly:
- Where things are
- What they need to do
- Can operate independently of supervision
As employees grow with companies, they also develop key relationships. If a person leaves, they have the potential of taking their relationships with them such as:
- Clients
- Vendors
- Co-workers
So losing one employee could cost you key relationships that no one else has. This could negatively impact your business through loss of revenue or productivity.
Finally, golden handcuffs can be tied to performance goals. If properly incentivized, you can help your business grow and reach specific goals.
How Are Golden Handcuffs Designed?
Golden Handcuffs can be designed for:
- Short term
- Long term
- Hybrid period of time
These executive compensation packages can also have rolling vesting periods that help tie an individual to the company for a long period of time, if they wish to continue receiving these incentive benefits.
The benefits designed should be clear and easy to understand. Business owners want the golden handcuffs to be tied to a quantifiable measurement of performance or goals.
This makes it much easier to determine if an individual has achieved the benefits' purpose and reduces any potential conflict or miscommunication between two parties.
It is important to think about the benefit design with the golden handcuffs. Depending how it is structured, can be tax efficient for a business.
In some scenarios, the incentive could pay for itself by aligning benefits with goals. But you need to be careful.
Depending on the benefit offered, you may have additional reporting, documenting, and administrative requirements to stay in compliance with the Federal government, especially the Internal Revenue Code Section 409A.
6 Common Types of
Golden Handcuffs
There are six main methods to create a golden handcuff package. These financial incentives can be mixed and matched to meet specific goals of a company.
The design will be dependent on what your overall goal, timeline, and funds available for the executive compensation package.
1. Cash Bonuses
2. Stock Incentives
Stock incentives are an option for an employee to be given company stock or able to purchase it at a discounted price.
3. Phantom Stock
Phantom stock, also known as Stock Appreciation Rights, is a deferred cash bonus program that is tied to the market value of the company's stock. The employee does not receive any real stock so they do not receive any of the benefits of ownership.
4. Annuities
5. Insurance Policies
6. Supplemental Executive Retirement Plans
How Much do Golden Handcuffs Cost?
The cost of golden handcuffs can vary greatly and really depends on the situation. It is dependent on:
- The purpose of the plan
- The type of plan you want to provide
- The benefit you would like to provide
Executive compensation packages can be as expensive as you want them to be. When designing the plan, it is important to know what the potential tax implications will be for not only the employer but the employee.
It is vital to be aware of the type of plan you are choosing, as depending on the methods being used, you may be causing additional administrative and regulatory requirements to be triggered.
These two aspects can have a major impact on the cost of the golden handcuffs.
Our Golden Handcuff Services
Langan Financial Group has been creating executive compensation and golden handcuff packages for over 35 years.
If you are looking for:
- Help to retain key employees
- Help to recruit key employees
- Help to incentivize your company's growth
We are more than happy to have a conversation with business owners to discuss golden handcuffs packages. We can discuss what type of design you are looking for and your budget.
These conversations are always free and we can provide what options may work for you.
Help Maximize Compensation Benefits with a Golden Handcuffs Advisor
Call Langan Financial Group's Business Financial Advisors to set a time to talk about ways to help your business.
You can reach us at 717-288-1880 or visit our contact us page to send an inquiry. We will be sure to respond within 24 hours.
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Disclosure: Check the background of your financial professional on FINRA's BrokerCheck. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Cambridge and Langan Financial Group, LLC. are not affiliated. Cambridge Investment Research Advisors, Inc. a Registered Investment Advisor. Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC, to residents of: AL, AZ, CO, DE, FL, GA, IA, KY, MD, NJ, NM, NY, NC, OH, PA, TX, VA, WI Cambridge and Langan Financial Group does not offer legal advice. Estate planning services are in regards to your overall financial plan. Always be sure to speak to a legal professional in regards to specific legal matters. Fixed insurance services offered through Langan Financial Group.
Testimonial/Endorsement Disclosure: The testimonials may not be representative of the experience of other customers. The testimonials are no guarantee of future performance or success. All of the testimonials/endorsements are clients with the exception of Steven Martinez of York SPCA. There was no cash nor non-cash compensation for any of the testimonials provided.
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Phone: 717-288-1880
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