Companies try to offer their personnel the incentives and bonuses they feel or see generate the best responses. These options may include salary hikes, one-time payouts, physical compensation or wellness programs, among other benefits. Determining the value of all these rewards and balancing them out as an overall income figure however may show that businesses aren't compensating their staff members in a way that makes for competitive wages. Worse, it may wind up at the end of the year that tax rates for personnel are higher than they should be due to poor incentive compensation management.
Forbes wrote that companies should be mindful of reporting requirements when creating compensation solutions. These resources need to provide a mix of financial and alternative forms of income so that employees get the best mix of W-2, K-1 and other statements for their annual tax returns. In some cases, offering dividend payouts or vesting personnel could have a more positive impact at the end of the fiscal year, depending on the kind of company offering the payout. Whether it's an S or C Corp makes a big different in how these businesses should reward their employees.
Finding better reward strategies
The source stated that helping staff suppress their wages can actually help make for better long term planning. For example, as of this year, the maximum reportable income in order for individuals to remain compliant with pension plans was $255,00. Finding ways of creating bonuses for staff members who already make or have earned close to that amount in a given year can help these employees stay on the right side of their retirement plans and still give them a sense of value and engagement within the organization. The trick is finding out what products or services don't have to be reported to the IRS or aren't considered mandatory for reporting purposes. That way, both the business and the employee can benefit from incentive compensation solutions and tax rates for these entities won't go up.
Farm And Dairy stated that it's important for companies in every sector to consider these kinds of incentive compensation programs. Every industry has competition and all businesses want to reward their staff for going above and beyond the basics of what's required of them. The source pointed out that, just because an employee works in farming or agriculture, firms must still find ways of incentivizing these positions without creating tax reporting problems for their personnel.