A long-term incentive plan (LTIP) is a strategic compensation program that rewards your employees, typically executives or exceptional performers, with equity, cash, or other valuable benefits when they meet specific multiyear goals. LTIPs provide financial rewards that vest over multiple years (typically three to five).
Long-term incentive plans are how you tell your team “We’re in this together for the long haul”—and mean it. You’re connecting what they earn to what you achieve together: hitting those revenue goals, breaking into new markets, or watching your stock price climb. It’s a partnership, not just employment.
Which LTIP should I offer?
There is no one LTIP to rule them all. Here are standard long-term incentive plans to choose from, depending on your company type.
For public and private companies:
- Retirement plans with employer match, like 401(k)s in the U.S.
- Cash awards
- Transitioning ownership
For public companies:
- Stock options
- Restricted stock units (RSUs)
- Performance awards if the company reaches a target, like a total revenue share (TRS) or earnings per share (EPS)
You can design a long-term incentive plan that meets the unique needs of your talent and supports your compensation strategy. For example, a privately held company could offer an LTIP that looks like a 401(k) match and offer cash awards.
LTIPs vs. other incentive plans and benefits
Which incentive approach is right for your people? Long-term, short-term, something else?
It all depends on what you are trying to achieve—and when you want it accomplished. The table below summarizes other incentives and benefits options and how they are different from a long-term incentive plan.
| Type | Description | Key difference from LTIPs |
|---|---|---|
| Short-term incentives (STIs) | Annual bonuses, tied to individual or team goals | Rewards annual performance, not long-term results |
| Profit sharing | Company-wide bonus, based on profits | Less personalized, usually not performance-based |
| Traditional benefits | Healthcare, retirement, paid time off (PTO) | Fixed benefits, not performance-linked or variable |
| Commission plans | Variable compensation, tied to an employee’s sales | Focused on short-term sales performance |
So, all things considered, why choose a long-term incentive plan?
Answer: It’s in the name. Long-term retention. Unlike traditional benefits or short-term bonuses, LTIPs keep your best people around by linking their pay to how long they stay and how well the company performs over time. Stay longer, achieve more together, earn more—simple as that.
Why should LTIPs matter to you?
1. Attract and keep top talent
In high-growth markets where top talent gets multiple offers, long-term incentives help you stand out from everyone else trying to hire the same people. And here’s the kicker: when rewards unlock over three to five years, your employees have real reasons to stay put instead of jumping ship for the next shiny opportunity.
2. Have employees who champion your strategy
When you offer long-term rewards tied to multiyear success metrics, you’re essentially inviting top talent to become co-owners in your company’s growth, rather than just workers clocking in and out. If your employees have an ownership mentality, then they are more likely to stay with the company and focus their efforts on value creation over the long term, rather than short-term wins.
3. Stand out from other employers
In the executive recruiting arena, LTIPs are your competitive edge, differentiating your employee value proposition (EVP) from the pack. They signal to senior-level candidates that you’re not just offering another job, but a genuine partnership in building something extraordinary.
Notably, not offering LTIPs will set your company apart, but not in the way you want. According to a 2024 Pearl Meyer report on executive pay, 97% of executives in publicly traded companies and 68% in private ones are offered LTIPs. Put simply, long-term incentive plans are common and, for public companies, typically expected.
Considering LTIPs for your global talent?
Because legal requirements vary dramatically by jurisdiction—from securities regulations and tax implications to data privacy laws—designing an LTIP for your international talent is a complicated undertaking.
And it’s not just compliance that’s tough to figure out. Cultural considerations are equally critical. Employee ownership preferences differ by region. These cultural nuances directly impact your plan’s effectiveness and participation rates.
And we haven’t even talked about currency differences between countries and currency fluctuations, which affect how your talent perceives the value of cash-based LTIPS.
Smart employers work closely with advisors with local expertise—like Pebl.
Our Employer of Record services ensure LTIPs comply with in-country regulations and meet cultural expectations. At Pebl, we advise you to create customized approaches to incentives and benefits that feel authentic to your brand and equally motivate your employees in every market, rather than applying a one-size-fits-all global template.
Need support rewarding your global talent? Let’s talk.
This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free.
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