Your Wealth, Health, And Lifestyle Newsletter

Best Alternatives to Straight Salary

By: Jason Markum

We are in the middle of possibly the worst recession in American history. People are getting laid off right and left and there doesn’t seem to be any end in sight. If you are one of the lucky ones to still have a job, or have just received a new job, you may feel a little apprehensive about negotiating a higher salary; even if you deserve one!

Since the economy is in such bad shape, why not try this technique to increase your compensation levels without increasing your straight salary, or I should say, without increasing the “cash” part of your salary. What the heck am I talking about? I’m talking about alternatives to straight salary, or non-cash compensation.

You may suggest to your new employer that they lower or give you the minimum range in cash compensation, but make up for it by increasing the non-cash compensation part which may be easier for your employer to do within the current state of the economy. It also shows that you are a team player, and willing to help out the team in any way!

So what are these non-cash compensation things that I keep talking about? Well they include stock options, employee benefits, perks such as company cars and limousines, club memberships, and things like that; as well as low interest rate loans and free financial planning advice. Basically, we’re talking about anything that is not cash.

Maybe the best non-cash compensation is stock options. Options make a lot of people nervous because on any given day the stock market can go up or down. If the stock market goes down, your options aren’t worth as much. And also, stock prices don’t always reflect the companies true earnings or true worth.

Regardless of these objections, stock options continue to be a fantastic non-cash compensation, especially in a down economy because they don’t cost the company anything out of pocket.

Options usually come in three variations. These include; incentive stock options, non-qualified stock options, and various forms of hypothetical stock usually called stock appreciation rights or sometimes called phantom stock plans.

Incentive options and non-qualified options are actual stock while hypothetical stock or phantom stock may not involve actual stocks. Regardless, in all three cases you would need an increase over the initial stock price at the time the option was issued before you can exercise the option and actually benefit from it.

Stock options will require tax planning on your part. Be sure to negotiate free tax planning advice from your employer. Let me make that clear; I don’t mean getting advice from the employer I mean that your employer will pay an accountant or legal professional who is licensed to give advice in this area for you.

Stock options in my mind are the best non-cash compensation. I did mention earlier in the article employee benefits as a feasible non-cash option. Perks and employee benefits would be included in this sort of thing. I’m not going to go into those in greater detail because they aren’t as valuable or as fungible; that is, not as easily converted into cash as stock options are and therefore may not be quite as acceptable to you in lieu of cash salary.

However you end up splitting up the non-cash compensation, keep in mind that the economy may turn around in the future at which point you may be able to negotiate a decrease in non-cash compensation and an increase in cash compensation. Be sure to discuss this before hand, that is to say, before you agree to take any non-cash compensation offers that your company may provide.

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