Long-Term Incentive Plan

A reward system which is designed for the purpose of improving an employee's long-term performance with the help of incentives or rewards that may not be connected to the company's share price is called as a long-term incentive plan or LTIP. To get this incentive an employee, usually an executive, must fulfill various requirements/conditions in order to prove his contributions in increasing the company's shareholder value. 
LTIP, though it is focused on employees, it is usually a tool for the company itself aiming for a long-term growth. When the company's LTIP and objectives for growth plan matches, the employees would have a clear picture on the performance factors and areas to focus so the company grows and the employee earns personal compensation too. Also, this plan helps in retaining the top talent in a highly competitive work environment. Types of LTIP include the 401(k) retirement plan, sabbaticals, vacation increases, cash and stock options. 

LTIPs help in retaining employees and makes them stay loyal towards the company. The company's expenses relating to recruiting and training is cut down as employees do not leave the company. 


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