Deferred compensation
- Content Team
- April 1, 2024
Applicant Tracking, Recruitment Marketing, Sourcing and Talent CRM software are powerful alone, but unstoppable when used together!
Deferred compensation refers to a portion of salary or compensation which is paid to an employee at a later date.
Deferred compensation definition
Deferred compensation refers to a portion of salary or compensation which is paid to an employee at a later date. It means that part of the compensation is postponed for a certain time.
This is usually done in order to defer tax to a future date when the rate is lower.
Types of deferred compensation
1. NDCP, Nonqualified Deferred Compensation Plans – when the employee gets paid on a pre-specified date in the future for the work he/she has done in the present. The payment usually happens at the time of termination of employment, death or disability.
2. Qualifying Deferred Compensation – includes plans for public education employers, non-government organizations, non-profit organizations, state and local government organizations.
Deferred compensation examples
1. Retirement plan – what is given to the employee once he/she retires from their services with the company
2. Pension – what is paid once an employee retires
3. Employee stock option – what is given to employees as a part of their compensation
All these examples deduct a proportionate monthly/quarterly/yearly premium from the employee’s income which is not covered under tax-deductible income for the current month/quarter/year.
Applicant Tracking, Recruitment Marketing, Sourcing and Talent CRM software are powerful alone, but unstoppable when used together!