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Overview
A deferred compensation scheme is a mutually arranged plan between the employer and the employee whereby the employer provides cash benefits, in addition to conventional approved funds already in place, to selected employees in the form of a gratuity at retirement or on disability or to their dependants on death.
Features
- Funded by an endowment policy taken out on the life of the employee
- A cash lump sum is paid out to employee at retirement
- Death and disability cover included in the policy
- A service agreement between the employer and employee is drawn up
- A board resolution is required to give effect to the scheme.
Benefits
- Premiums paid by the business are tax deductible, provided the policy conforms to certain regulations
- Awards received by the individual are tax exempt up to certain limits
- Attractive perk to senior executives in business
- Assists in retaining staff as they find it difficult to leave and lose benefits.
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