Question 1 - Two type of incentive

There are two types of incentives: in cash or in kind. This is an important distinction so read more about it by clicking the button.

Press an option to continue
Option 1
Cash incentive

Your employees will be paid in cash for their performance

  • Current shareholders do not get diluted
  • Tax deductible for the company
  • Easy to implement and maintain
  • Payments are taxed as income for the employee (box 1)
  • The company has to (consistently) be able to keep paying the employee from its cashflow
  • Employee does not become a co-owner (less engagement/involvement)
Option 2
Equity incentive

Your employees will be paid in a form of equity

  • More favourably taxed (either box 2 or box 3)
  • No initial cashflow impact for the company
  • Employees feel like they become a co-owner
  • Actual earnings are uncertain for the employee
  • Incentive is not tax deductible for the company
  • More time-consuming and more expensive to implement and maintain