Small Business

How to Properly Pay High Paid Employees

Highly paid employees such as the CEO, CFO, and top level managers bring about a different set of challenges when it comes to proper compensation.

Highly paid employees, usually the CEO, CFO, and higher level managers, bring about a different set of challenges when it comes to proper salary and benefit packages.  The government only allows $1,000,000 in base compensation per employee to be deducted for income tax purposes.  However, for those highly sought-after executive positions, that might not be enough.

How can you go about paying a competitive package while still being able to write off a significant portion for income tax purposes?  It is a delicate balance that should be discussed with your most trusted tax advisor.  Generally speaking, you can lure top level executives with a mix of salary, bonus, stock options, and other non-cash incentives such as additional retirement carve out benefits, vacation time, car perks, and high-level health benefits.

Cash Compensation

Although a highly compensated employee’s base salary might be capped at $1,000,000 for tax purposes, there are often other methods to make sure they are properly compensated.  A proper bonus structure, normally a percentage of revenue or salary, could lead to a significant bonus for high level executives.  It is a great incentive for executives and managers to properly supervise their revenue generating employees.

Along with a significant bonus structures, high level executive retirement plans could be put in place.  Balancing cash and other executive compensation benefits can be advantageous to the employee, by increasing retirement saving, and to the employer by providing tax benefits.  Consulting an expert in employee benefits is recommended.

Other Sought-After Benefits

There are various fringe benefits, extra benefits that supplement an employee’s salary, that can lure in the best executive employees and managers.  While some of the perks are strictly financial, others focus more on employee satisfaction.

Some examples of additional financial perks include: top notch health insurance, which can potentially save the employee from co-pays and paying for other medical procedures out of pocket; disability insurance; and more robust life insurance plans. These perks offer the employee peace of mind while they work hard to increase their company’s bottom line.

Other quality of life perks can include, but are not limited to, access to company paid car, free or discounted cell phone service plans, and vacations to exotic locations.  The company can also offer additional vacation time so the employee can relax with their friends and families – most employees would return to the office refreshed and ready to work hard after a nice, relaxing vacation to anywhere tropical.

Although base salary might be limited due to tax rules and regulations, there are plenty of additional perks that a company can offer its top level employees to keep them happy and hard working.


Properly paying your top employees, including your CEO, CFO, and other managers, can be a delicate balance between an attractive salary with a bonus structure, retirement contributions, stock options, and other non-cash benefits.

If your company is not up to date on the most creative compensation methods, it will be tough to lure and keep the top talent!  An experienced accountant and business advisor should be able to assist in creating competitive compensation packages.

Jeremias Ramos is a CPA working at a nationally recognized full-service accounting, tax, and consulting firm with offices conveniently located throughout the Northeast. Jeremias specializes in tax and business consulting with focus areas in real estate, professional service providers, medical practitioners, and eCommerce businesses.

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