Compensation: Salary, bonus, expenses, equity participation

⚡tl;dr salary is not the only component of an employee's compensation bonuses, commissions, expenses, and equity participation also play a role think about your compensation strategy holistically to ensure it incentivizes employees book a free call with us salary 101 salary is the cash payment paid to your employees on an hourly, weekly, or monthly basis in traditional employment relationships, the salary is defined annually and paid monthly (i e , over 12 months) you can agree on an additional salary (i e , the 13th salary ) and when it will be paid (e g , in december) best practices 13th salary it is clearly stated whether the salary is paid 12 or 13 times per year bonus 101 bonuses are usually discretionary , meaning that it is solely up to the employer to decide whether a bonus will be paid and the extent of said bonus however, bonuses can be mandatory , meaning they are part of the legally owed salary, and the employee can claim such bonuses this is the case when the bonus is tied to certain goals (e g , sales commission tied to sales targets); or the bonus is paid in a similar amount for three consecutive years best practices bonus bonuses are either tied to specific measurable goals, or labelled as discretionary in the employment agreement and on every single bonus payment letter commissions 101 in addition to the base salary or any bonuses, the employer and the employee can agree on commissions a commission is a percentage of a particular transaction in which the employee was involved there can be a delay between the moment a commission is owed and when it is paid indeed, a commission is owed when the transaction giving rights to it enters into force it is then paid later as per the parties' agreement best practices commissions the types of transactions giving rights to commissions are clearly defined in the employment agreement, and a cap is added to limit the maximum amount that can be due as a commission on a yearly basis expenses 101 expenses compensate payments made by the employee for the company, such as buying a train ticket to meet a client having a ruling is beneficial for both the company and the employees indeed, this allows the company to pay a flat fee expense reimbursement per employee per month, simplifying its accounting and giving a tax advantage to the company and its employees expense payments to employees are not subject to social security payments additionally, your employees won't have to pay income tax on expenses since this is merely a reimbursement best practices expenses a ruling is obtained from the competent cantonal tax authority regarding the company's expense policy equity 101 another compensation option is to (partially) remunerate your employees (or freelancers, board members, etc ) with equity this can be done via an employee stock option plan or a phantom stock option plan check out our page on esop/psop docid\ h4fpzvdxgadve7pmeltac for more details how do i think about my compensation strategy? the best compensation strategy depends on various factors such as cash flow; need to incentivize employees; position and responsibilities of each employee; stage of development of your company; etc generally, such a strategy will combine various elements and will vary depending on each employee book a free call with us here and register for our compensation strategy workshop