Definition of Deferred compensation:
Deferred compensation is a portion of an employee's compensation that is set aside to be paid at a later date. In most cases, taxes on this income are deferred until it is paid out. Forms of deferred compensation include retirement plans, pension plans, and stock-option plans.
An employee may opt for deferred compensation because it offers potential tax benefits. In most cases, income tax is deferred until the compensation is paid out, usually when the employee retires. If the employee expects to be in a lower tax bracket after retiring than when they initially earned the compensation, they have a chance to reduce their tax burden.
Benefits, bonuses, incentives, and other forms of remuneration that are paid out in an accounting period later than in which they are awarded, in accordance with a plan. See also immediate compensation.
How to use Deferred compensation in a sentence?
- Deferred compensation can be qualified or non-qualified.
- The attractiveness of deferred compensation is dependent on the employee's personal tax situation.
- Deferred compensation plans are an incentive that employers use to hold onto key employees.
Meaning of Deferred compensation & Deferred compensation Definition