Higher Income Taxes Prompt New Pay Strategies

Irvine, CA, February 09, 2013 --(PR.com)-- The tax increases instituted for 2013 and beyond are prompting businesses to evaluate their approach to compensation, especially for key producers, according to Tom Miller, president of The VisionLink Advisory Group, a compensation consulting firm headquartered in Irvine, CA. Companies are searching for ways to minimize income taxes for employees while still protecting and growing shareholder value. The increase in income taxes will especially hit highly compensated employees.

“There have always been rewards strategies that can help mitigate the income tax impact for those in upper brackets,” Miller offered. “However, the change in tax rates is creating a greater sense of urgency about this issue.” The VisionLink leader will discuss this topic and how its impacting businesses today in a webinar on February 26 entitled, “Compensation Strategies for a High Income Tax Environment.” Registration for the free broadcast can be accessed at: http://www.vladvisors.com/business-growth-strategies/event-details.aspx?ID=110. “We’re doing this webinar to help business leaders think differently about their approach to compensation in the new tax environment and to see that they have viable options,” Miller said.

The compensation consultant offered examples of how companies are starting to address this issue. “In the environment we’re in, businesses are thinking in terms of creating wealth building opportunities that have little or no current income tax consequences. They want to minimize guaranteed income and even short-term incentives and defer as much as possible.”

Miller went on to explain that strategic deferred compensation is one of the tools companies are using in this regard. “This type of plan has been around a long time and is experiencing a resurgence because it offers so much flexibility. Deferred compensation can be constructed so both employer and employee contributions can be accepted. This gives employees some level of control over how much income they want to take in the current year and how much they want to defer to a later time. And it allows the company to make contributions based on performance requirements or other defined metrics. Some or all of the company’s payments to such plans can be tied to the value of the business or other financial measurements if the company wants. In short, a lot can be done to create a more favorable tax impact for high level people with this kind of plan.”

The VisionLink CEO further explained that companies are turning more and more to long-term value sharing arrangements as other strategic tools to combat higher taxes. Such plans also create more alignment between company leaders and shareholders. “When the way someone is paid begins to simulate how owners are compensated, you’re going to get a more pervasive ownership mindset throughout the organization,” Miller said. “And that approach attracts the kind of talent businesses most need these days. They need entrepreneurial talent that can fuel the innovation companies need to thrive and grow in today’s economy.”

Long-term value sharing plans include restricted stock, stock options, phantom equity, SARs, performance unit plans and profit pools - and their variations. Each of these plans has more favorable income tax consequences (in the current year) for key producers than salaries and bonuses. For more specific information on each of these plans, go to http://phantomstockonline.com/tools/which-plan-is-right-for-your-company.aspx.