What kinds of incentive plan are most commonly offered and to whom?

Employee Incentives

United States Small Flag United States

The types of plan and the recipients of awards will vary with the maturity and industry of the company and whether it is a corporation or a tax pass-through such as a partnership or a limited liability company (“LLC”).

Established companies whose shares trade on a US stock exchange typically issue restricted stock units or “RSUs.” High-growth public companies such as biotechs will often issue stock options.

Most US private companies are organized as LLCs which issue rights to future appreciation known as “profits interests.” Private companies organized as corporations will issue restricted stock and/or stock options.

While some start-ups and high-tech companies offer equity broadly to a substantial percentage of employees and many consultants, except for publicly-traded companies (which offer employee stock purchase plans) most mature companies, companies in other industries and LLCs confine awards to executives and key managers of the company.

Mexico Small Flag Mexico

Incentive plans in Mexico are not mandatory and in general, the employer or a related company can design and offer them without limitation. The most common incentive plans are offered to white-collar employees in the form of performance bonuses, sales commissions and equity plans. Although certain companies have established incentive plans in favour of blue-collar workers based on productivity, this is still not a wide-spread practice and has the potential risk of involving the union representing the workers in the plan’s design and operation. Careful drafting of the country’s participating plan and/or participants’ enrolment forms will reduce potential labour risks of a joint liability, if the offeror of the plan is not the Mexican employer of the employees that can participate in the incentive plan.

Romania Small Flag Romania

As a rule, there are no mandatory incentive plans expressly provided by law. The decision of offering incentive plans thus lies with the employer, depending on its business organisation needs and typically cascading their group's culture and approach into their Romanian affiliates.

Incentive plans are used for motivating employees and typically, in practice, there is a distinction between the plans for sales employees by comparison with other categories of employees. More specifically, considering the nature of their work and its direct impact, sales employees are generally incentivised with commission schemes or incentive plans closely linked to sales targets, while the most common type of incentive plan for other categories of employees is the performance bonus. This is also linked to (annual) performance targets / objectives, typically comprising an element of individual performance and an element of business performance of the organisation. Based on our experience, the majority of Romanian employers offer performance-related incentive plans, especially for white collar / office jobs, usually to all their employees.

Of course, incentive plans may be used not only to motivate employees to do their job and possibly an extra mile for reaching their targets, but also for employee retention and fidelity/ loyalty. In these cases, the incentive depends on the element of time, namely the seniority within the employer (for example, by granting seniority bonuses at certain work anniversaries, such as 5 years, 10 years, 15 years etc.). Flexible-benefits type of arrangements - essentially allowing employees to choose whatever serves them best from a pre-set pool of benefits committed by the employer - are increasingly gaining popularity for the same reason.

Share option plans are the incentive type that could secure both motivation and retention of the employees as the employee's benefit grows proportionately with the success of the business and the vesting depends on the individual still being employed with the company at relevant dates, therefore covering both elements.

Denmark Small Flag Denmark

In Denmark, cash bonus plans are common for (almost) all levels of employees, however, more common in relation to white collar employees than for blue collar employees.

For specialists, managers or executives cash bonus plans as well as share based incentive plans are common, with the latter being more common for larger companies.

For the different kinds of incentive plans offered, see question 2.

Ecuador Small Flag Ecuador

Ecuadorian legislation is protectionist when it comes to workers, offering them important benefits and guarantees. This has not been an impediment, however, for corporations to implement their own incentives plans, which are agreed upon with their employees. These voluntary incentives can be defined as follows:

- Cash-based: Different bonuses granted based on the criteria of meeting objectives, reaping results in the short or medium term, share option plans, and so on.

- Non-cash-based: Cars, subsidies, club memberships, training, extended days of maternity and breastfeeding leaves, short work schedules and so forth.

There are no restrictions on employees in terms of their access to incentive plans or on companies wishing to offer them. Voluntary incentive plans may be proposed to employees, managers, expatriates, legal representatives, etc.

Updated: January 8, 2019