For a variety of motivational and tax purposes, firms do not rely exclusively on cash payments to compensate employees for services rendered. The three primary types of “deferred benefits” that firms give to employees are pension payments, health care benefits, and stock options. These are essentially delayed compensation.
Let us begin with pension and health care costs. Today, most pension and health care costs are defined contribution plans. This means the firm agrees to make a set contribution. For pension costs, firms pay a fixed amount usually based on the employee’s salary (the fixed contribution made by the firm can come with or without a cap or maximum and is often matched to contributions made by the employee). ...
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