Attracting top talent is only half the battle—keeping them is the real challenge. As employees increasingly seek more than just a paycheck, organisations must rethink their reward strategies to build lasting loyalty and engagement. Offering meaningful incentives to reward employee commitment and encourage high performance is not just effective—it's also budget-friendly. After all, it costs far less to retain valuable employees than to replace them.

As according to a report by PeopleKeep, replacing an hourly worker may cost around US$ 1,500 per employee, while technical roles can demand 100–150 percent of the employee’s salary. The highest costs are seen at the executive level, where C-suite turnover can reach 213 percent of salary. These expenses stem from recruitment, onboarding, lost productivity, and the impact on team morale. 

So, how can organisations set things right—without losing top talent or increasing recurring costs?

LTIs: a hook to attract employees

There is a powerful - and sometimes underutilised - approach that serves as a powerful magnet for retaining talent in companies. These are long-term incentive plans (LTIPs), which are changing the way businesses retain their best talent. From stock options to performance-based shares, these deferred rewards create a win-win scenario: employees accumulate wealth while companies maintain continuity.

LTI plans are designed with a deferred payment structure that rewards employees over an extended period. LTIs aim to encourage employees to stay with the company for a long time and to keep up the good work. They are usually offered through mechanisms such as shares, profit sharing or deferred cash.

Although salary and short-term bonuses play an important role in attracting employees, they often fail to foster long-term commitment. This is where long-term incentives (LTIs) come in, structured rewards that encourage employees to invest in the future of the company while ensuring their own financial stability. Unlike annual bonuses, LTIPs align individual and company interests, motivating employees to stay committed and contribute to the sustainable growth of the business.

"Different types of long-term incentives offer varying advantages and support diverse goals. Stock options drive up value creation and performance, while restricted stock options encourage executive retention and offer more certainty. It is important to carefully consider the alignment of incentives with the company's long-term goals and principles to ensure sustainable growth," explained Dua Munawar Memon, an Executive Compensation Consultant at Deloitte UK. 

"Additionally, monitoring incentive effectiveness is crucial to ensure alignment with intended performance and value creation goals. Furthermore, implementing safeguards, such as remuneration committees using discretion or employing malus and clawback provisions, can ensure fair incentive outcomes and ethical conduct on the part of executives," she added.

But how can companies effectively implement LTIs?

These types of incentives are designed to reward employees over several years, ensuring that they remain committed to the long-term success of the company. They include stock options, restricted stock units (RSUs), performance shares, deferred compensation plans, and long-term cash bonuses. Each mechanism provides financial security while reinforcing a culture of shared success.

"In my view, RSUs is one of the best tools for retaining the organisation HiPos and senior leadership team only if the scheme design is lucrative enough to keep them engaged with the organisation, using an annual vesting % and a new annual grant % keeps the scheme alive an ties the desired talent with the organisation and increases the stickiness. the only watch-out is how effective the talent identification process is. in the end we don't want to implement the right measures to retain the wrong calibers," underlined Mahmoud Abdel-Mawgoud, an Egypt-based HR Director & Total Rewards leader

Stock options, for example, allow employees to purchase company shares at a fixed price, making them more valuable as the company grows. RSUs, on the other hand, provide shares that vest over time, reinforcing employee loyalty. Performance shares reward employees based on the achievement of business objectives, ensuring alignment between individual efforts and company performance. Deferred compensation plans allow employees to set aside earnings that mature over time, offering financial stability. By integrating these strategies, companies can create an engaged workforce that thinks beyond short-term gains and focuses on long-term growth.

Muhammad Haseeb Azam shared, "ESOP, ESPP, and RSU can increase your income and wealth through share appreciation and dividends...Owning a part of the company can make you more motivated, engaged, and loyal to your employer. You can share the company's vision and mission and have a say in its decisions. Participating in these plans can enhance your financial literacy and discipline. You can learn more about investing, saving, budgeting, diversifying, and strategising your portfolio." 

"ESOPs, ESPPs, and RSUs hold strategic importance in employee compensation design. ESOPs cultivate ownership and align interests with company performance. ESPPs offer discounted stock options, enhancing financial incentives. RSUs, tied to performance, attract and retain top talent. These programs, with their tax benefits, promote engagement and loyalty, proving pivotal for long-term organisational success," Dua noted

Although LTIPs have traditionally been reserved for senior management, they are increasingly being extended to a broader workforce. North American companies have long adopted these strategies, but they are now gaining ground in Latin America and other global markets. As multinational corporations introduce these models, local companies are also adopting similar approaches to remain competitive in attracting and retaining top talent.

Gerardo Guerra, VP of Total Rewards at Amgen noted, "The road of Incentive Design is full of hurdles; some of the hazards and challenges of equity-based incentives are:

• They can encourage short-termism, as executives have an incentive to quickly boost share price (or meet performance thresholds).
• They may dilute ownership (or control) for existing shareholders, especially if the equity grants are large or frequent.
• They might create conflicts of interest (or agency problems) as executives’ preferences can be misaligned with those of shareholders (and since they have different information, they could use it -or disclose it- to their advantage).
• Specifically for Stock Options, their asymmetric payout (infinite upside vs limited downside) creates an incentive to take excessive risk."

A case study of Amazon

Amazon demonstrates a distinctive approach to long-term incentives, emphasising the long-term alignment between employees and the company's success. The design of the long-term incentive plan is a process that involves several factors, such as the company's business strategy, market practices, profit and loss projections, consequences for cash flow, tax efficiency, the influence that executives may have on the performance measures that will be used and, finally, whether participants understand the plan and the performance measures adopted at the beginning and can continue to do so during the term of the plan.

Until a few years ago, companies adopted long-term incentive plans without changing other organisational conditions, and they worked for several years without being the center of attention. Therefore, long-term incentive plans:

• Need to be reviewed annually.
• Take various forms, dynamically adapting to the specific needs of each company.
• Are likely to be stock option plans, although in some companies they may be used in combination with other long-term incentive plans.

"While stock-based incentives are seen as powerful tools for attracting and retaining top-notch talent, they can also create dependency on these incentives as part of total compensation. This can make it difficult to retain executives during periods of poor stock performance, and potentially attract executives who are more interested in short-term gains than the company's long-term success," warned André do Carmo, HR Director at Senior HR Training and HR Consulting firm. 

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What are the latest trends in LTIs?

Companies are adapting LTIs to offer more flexibility and customisation. Younger employees, particularly Zillenials, often prioritise financial stability, job mobility, and working with a purpose over traditional multi-year rewards. In response, companies are refining their LTI programs to meet modern needs.

An emerging trend is the option for employees to choose between share-based or cash incentives, allowing them to tailor their compensation to their financial goals.

In addition, environmental, social, and governance (ESG) factors are being incorporated into LTI plans, rewarding employees for contributing to sustainability and ethical business practices. This shift reflects the growing importance of corporate responsibility in employee engagement.

Remote working has also influenced LTI structures. As employees work from different locations, companies are using share-based incentives to maintain the commitment and loyalty of distributed teams. Another important change is the reduction of vesting periods. Traditionally, LTIPs require employees to stay with a company for five years or more to fully benefit from their incentives. However, recognising the increase in labour mobility, companies are introducing shorter vesting schedules or partial vesting options. This makes LTIPs more attractive while remaining an effective retention tool.

But there are challenges too.

"One main challenge is aligning the interests of executives with long-term shareholder value while avoiding short-termism. Additionally, fluctuations in stock prices can affect the perceived value of the incentives, potentially leading to dissatisfaction among executives. There's also the risk of dilution of ownership for existing shareholders if new equity is issued to fund these incentives. Moreover, designing equitable plans that balance the needs of executives and shareholders while considering regulatory compliance adds complexity. Finally, managing the accounting and tax implications of equity-based compensation schemes requires careful navigation to ensure transparency and compliance," suggested Amr Ghazy, an Egypt-based HR Manager.

Saikat Ghosh, a People, Culture & Wellbeing leader underlined key considerations for LTIs:

1. "Consider the cultural fit of equity-based incentives; in some regions or industries, other forms of compensation might be more effective or valued.
2. Be aware of the dilutive effect of equity incentives on current shareholders and evaluate the need for shareholder approval for new equity grants.
3. The lifecycle stage of the company can significantly influence the structure and appeal of equity-based incentives, with startups leaning more on options and mature companies on restricted stock.
4. The overall market conditions and the competitive landscape should be considered when designing these programs, as they can greatly affect the recruiting and retention capabilities of equity incentives."

5 best practices to get the best out of LTI plans for employees

To maximise the effectiveness of LTIs, companies must ensure that their programs are strategically structured and communicated. Here are five key considerations for successful implementation:

• Align LTIs with business objectives: Incentives should drive behaviors that support the company's long-term goals rather than simply serving as retention tools.
• Communicate clearly: employees must understand how LTIs work, including vesting schedules, potential financial benefits, and the impact of their performance.
• Ensure fairness and inclusion: broadening eligibility for LTIs beyond executives can improve engagement and foster a greater sense of loyalty at all levels of the organisation.
• Monitor and adapt: regularly evaluate LTI programs to ensure they remain competitive and relevant in a changing labor market.
• Balance short- and long-term rewards: a combination of immediate and future incentives keeps employees motivated throughout the different stages of their careers.

Organisations that offer great employee benefits—like fair pay, perks, and incentives—create a solid pathway to attract and retain talented people. A well-rounded compensation plan can help employees feel happy, motivated, and truly engaged in their work. But, to build lasting loyalty, it’s worth considering long-term incentives that go beyond the usual rewards. These incentives help align employees' goals with the company’s long-term success, making them feel more invested in the future. Now is the time to rethink how you reward your team and build a workplace where people want to stay and thrive, creating a strong foundation for lasting growth and success.