Compensation and Performance Management

Introduction to Compensation Management

[K]
Compensation:-
Compensation is all forms of financial returns, tangible
services and benefits employees receive as a part of an employment
relationship.

Advantages of Compensation:-
 Attracting Talent
 Retention
 Motivation and Performance
 Employee Satisfaction
 Reduced Turnover Costs
 Enhanced Employer Brand
 Legal Compliance
 Employee Loyalty and Commitment

Attracting Talent:-
Competitive compensation packages can attract top
talent to the organisation. Offering attractive salaries and benefits can
make a company stand out in a competitive job market.

Retention:-
Fair and competitive compensation can help retain
valuable employees. When employees feel adequately compensated
for their work, they are less likely to seek opportunities elsewhere.

Motivation and Performance:-

Compensation can serve as a motivator for
employees to perform well. Performance-based pay structures, such as
bonuses or commissions, can incentivize employees to achieve their
goals and excel in their roles.
Employee Satisfaction:-
When employees feel fairly compensated for their
work, it leads to higher job satisfaction. Satisfied employees are more
likely to be engaged, productive, and committed to their work.

Reduced Turnover Costs:-

High employee turnover can be costly for
organisations in terms of recruitment, training, and lost productivity.
By offering competitive compensation and benefits, companies can
reduce turnover rates and the associated costs.

Enhanced Employer Brand:-

A reputation for offering competitive compensation
and benefits can enhance an organisation's employer brand. This can
attract more qualified candidates and improve the company's image as
an employer of choice.

Legal Compliance:-
Ensuring that compensation practices comply with
legal requirements helps mitigate the risk of legal disputes and costly
penalties related to wage and hour laws, equal pay regulations, and
other employment laws.

Employee Loyalty and Commitment:-

When employees feel fairly compensated and valued
by their employer, they are more likely to develop a sense of loyalty
and commitment to the organisation. This can lead to long-term
relationships and lower turnover rates.
[U]
Disadvantages of Compensation
 Cost
 Inequity
 Negative Impact on Morale
 Focus on Short-Term Goals
  Retention Challenges
 Administrative Burden
 Budget Constraints
 Dependency on External Factors

Cost:-
Providing competitive compensation and benefits can
be expensive for organisations, especially for small businesses or
those operating on tight budgets. High compensation costs can impact
profitability and financial sustainability.

Inequity:-
Inequities in compensation can arise if there are
disparities in pay among employees performing similar roles or with
similar levels of experience and qualifications. This can lead to
dissatisfaction, low morale, and even legal challenges.

Negative Impact on Morale:-

If employees perceive their compensation as unfair
or inadequate compared to their peers or industry standards, it can
negatively impact morale and motivation. This can lead to decreased
productivity, engagement, and job satisfaction.

Focus on Short-Term Goals:-

Performance-based compensation structures, such
as bonuses or commissions, may incentivize employees to prioritize
short-term goals over long-term objectives. This can lead to a focus
on achieving immediate results rather than sustainable growth or
innovation.
[S]
Retention Challenges:-
While competitive compensation can help attract
talent, it may not always be sufficient to retain employees in the long
term. If other aspects of the work environment, such as organisational
culture or career development opportunities, are lacking, employees
may still choose to leave for better opportunities.

Administrative Burden:-
Managing compensation programs, including salary
reviews, bonus calculations, and benefits administration, can be
complex and time-consuming for HR departments. This
administrative burden can increase with the size of the organisation
and the complexity of compensation structures.

Budget Constraints:-
Budget constraints may limit the organisation's ability to
provide competitive compensation and benefits, especially during
economic downturns or periods of financial uncertainty. This can
make it challenging to attract and retain top talent.

Dependency on External Factors:-

Compensation decisions may be influenced by
external factors such as market trends, industry standards, and
competitor practices. Changes in the external environment can impact
the organisation's ability to maintain competitive compensation levels.
[H]
Principles of Good Compensation Strategy
 Appointing persons
 Helping of compensation decision
 Collection of data
 Reviewing
 Equality
 Consistency
 Flexibility
 Considering
 Solving problems
 Simplicity
Appointing persons:-
The schedule of events and responsibilities for those
involved in administering the compensation strategy must be
appointed.

Helping of compensation decision:-

The good compensation plan must be supportive in helping
the compensation decision and fixing compensation properly.
Collection of data:-
The financial information or data needed for administering
the compensation strategy and guiding compensation decision is to be
collected.

Reviewing:-
After the compensation plan is made, the reviewing of
compensation decision must be made from time to time.

Equality:-
The compensation plan must assure the employees of equitable
compensation for services rendered.

Consistency:-
A proper compensation plan must be consistent and stable.

Flexibility:-
Adaptability, adjustment must be there in proper compensation
plan so that, according to the situations the plans can be adjusted.
[A]
Considering:-
The individual capability efficiency, of the workers must be
considered so that the management can fix the compensation
according to their effort.

Solving problems:-
 A good compensation plan must solve the problems of the
workers and not to create the problems.

Simplicity:-
A good compensation plan must be very easy to understand
and simple so that the workers can calculate their wages by
themselves.

Classification of Compensation

 Monetary vs. Non-Monetary Compensation

 Direct vs. Indirect Compensation
 Fixed vs. Variable Compensation
 Internal vs. External Equity Compensation
 Intrinsic vs. Extrinsic Compensation
 Performance vs. Membership Compensation
 Legal vs. Discretionary Compensation

Monetary vs. Non-Monetary Compensation:-

Compensation can be in the form of monetary rewards
such as salaries, wages, bonuses, and commissions, or non-monetary
rewards such as healthcare benefits, retirement plans, vacation days,
and flexible work arrangements.

Direct vs. Indirect Compensation:-

Direct compensation refers to payments directly received
by employees for their work, such as base salary and bonuses. Indirect
compensation, on the other hand, includes benefits like insurance,
retirement plans, and paid time off.
[L]
Fixed vs. Variable Compensation:-
Fixed compensation is stable and does not fluctuate based
on performance or other factors. It includes base salary and fixed
allowances. Variable compensation, also known as performance-
based pay, fluctuates based on individual or organisational
performance. Examples include bonuses, profit-sharing, and stock
options.

Internal vs. External Equity Compensation:-

Internal equity refers to the fairness of compensation
within an organisation, ensuring that employees are paid fairly
relative to each other based on factors like experience, skills, and
responsibilities. External equity, on the other hand, involves ensuring
that an organisation's compensation is competitive relative to the
external job market.

Intrinsic vs. Extrinsic Compensation:-

Intrinsic compensation refers to non-tangible rewards
such as recognition, challenging work, and opportunities for personal
growth and development. Extrinsic compensation includes tangible
rewards like salary, bonuses, and benefits.

Performance vs. Membership Compensation:-

Performance-based compensation is tied to individual or
group performance, often in the form of bonuses or incentives.
Membership-based compensation is provided simply for being a
member of the organisation, such as base salary and benefits.
[C]
Legal vs. Discretionary Compensation:-
Legal compensation includes payments mandated by
law, such as minimum wage requirements, overtime pay, and benefits
required by labour laws. Discretionary compensation refers to
additional rewards provided at the employer's discretion, such as
bonuses and profit-sharing.

Types of Compensation
 Direct Compensation
 Indirect Compensation
Direct Compensation:-
Direct compensation refers to the monetary rewards
that employees receive in exchange for their work performed for an
organisation. It includes all forms of cash payments and financial
benefits that are directly paid to employees as part of their
employment agreement
 Basic Salary
 Bonuses
 Commissions
 Overtime Pay
 Profit Sharing
 Stock Options
 ESPP
 Salary Increase
 Allowance and Stipends
 Benefits

Basic Salary or Wages:-

Basic salary, also known as base salary, is the fixed
amount of money that an employee receives on a regular basis in
exchange for performing their job duties. It is typically expressed as
an annual or monthly amount and forms the foundation of an
employee's total compensation package. Basic salary is generally
determined by factors such as the employee's job role, level of
experience, skills, education, and market rates for similar positions.
[A]
Bonuses:-
Bonuses are additional payments made to employees as a
reward for achieving specific goals or targets. They can be
performance-based, such as hitting sales targets, meeting project
deadlines, or achieving certain metrics. Bonuses can be one-time or
recurring, and they can vary in size depending on individual and
company performance.
o Performance-Based Rewards
 o Incentive for Achievement
o Recognition and Appreciation
o Retention and Talent Management

 Performance-Based Rewards:-
Bonuses are often tied to individual, team, or
organisational performance metrics, such as sales targets, revenue
goals, customer satisfaction ratings, productivity measures, or other
key performance indicators. Employees may receive bonuses based
on their ability to meet or exceed predefined performance targets or
benchmarks.

 Incentive for Achievement:-

Bonuses serve as incentives to motivate employees to
perform at their best and achieve specific goals or objectives. By
offering monetary rewards for high performance, organisations can
encourage employees to focus on achieving results, driving
productivity, and contributing to the success of the business.

 Recognition and Appreciation:-

Bonuses can also serve as a form of recognition and
appreciation for employees' hard work, dedication, and contributions
to the organisation. By acknowledging employees' efforts and
achievements through financial rewards, organisations can boost
morale, foster a positive work environment, and strengthen employee
engagement and loyalty.
[R]
 Retention and Talent Management:-
Bonuses can be used as a tool for talent management
and retention by rewarding high-performing employees, recognizing
their value to the organisation, and incentivizing them to stay with the
company. By offering competitive bonus programs, organisations can
attract and retain top talent, reduce turnover, and build a strong and
committed workforce.
Commissions:-
Commissions are a form of variable pay commonly used
in sales and certain other roles. Employees receive a percentage of the
sales they generate or the revenue they bring in for the company.
Commissions incentivize employees to perform well and directly tie
their compensation to their performance.

Overtime Pay:-
Overtime pay is compensation provided to employees for
hours worked beyond their regular working hours. In many
jurisdictions, employees are entitled to receive overtime pay at a rate
higher than their standard hourly wage or salary.

Profit Sharing:-
Profit-sharing programs distribute a portion of the
company's profits among employees. This can be done through
bonuses, additional salary, or contributions to retirement accounts.
Profit sharing aligns the interests of employees with those of the
company, encouraging them to work towards its success.

Stock Options:-
Stock options give employees the right to purchase
company stock at a predetermined price within a specified period.
This allows employees to benefit from any increase in the company's
stock price over time. Stock options are often used as a long- term
incentive to retain and motivate employees.
[N]
Employee Stock Purchase Plans (ESPP):-
ESPPs allow employees to purchase company stock at a
discounted price, typically through payroll deductions. This provides
employees with an opportunity to own a stake in the company and
benefit from its performance.
Salary Increases:-
Periodic salary increases are adjustments to an employee's
basic salary to account for factors such as inflation, cost of living,
merit, or promotions. These increases recognize and reward
employees for their contributions and can help retain top talent.

Allowances and Stipends:-

These are additional payments provided to employees to
cover specific expenses, such as transportation, housing, or meals.
Allowances and stipends can be fixed amounts or based on actual
expenses incurred by employees.

Benefits:-
While benefits are not direct monetary compensation, they
are an important part of the overall compensation package. Benefits
can include health insurance, retirement plans, paid time off, and
other perks, which contribute to an employee's financial well- being
and quality of life.

Indirect Compensation:-
Indirect compensation refers to non-monetary rewards
and benefits that employees receive as part of their employment
agreement, in addition to their base salary and cash payments.
 Health Insurance
 Retirement Plans
 Paid Time-Off
 Flexible Work Arrangements
 Professional Development Opportunities
 Employee Assistance Programs
 Wellness Programs
 Employee Discount
 Workplace Amenities
[A]
Health Insurance:-
 Health insurance coverage helps employees pay for
medical expenses, including doctor visits, hospital stays, prescription
medications, and preventive care. Employers often subsidize a portion
of the premium costs, making health insurance more affordable for
employees and their families.

Retirement Plans:-
Employer-sponsored retirement plans, such as 401(k) or
pension plans, help employees save for their future. Employers may
offer matching contributions or profit-sharing contributions to
incentivize employees to participate in these plans and save for
retirement.

Paid Time-Off (PTO):-

Paid time off includes vacation days, sick leave, and
holidays that employees can take without losing pay. PTO allows
employees to rest, recharge, and attend to personal matters,
contributing to their overall well-being and work-life balance.

Flexible Work Arrangements:-

Flexible work arrangements, such as telecommuting,
flexible hours, or compressed workweeks, allow employees to have
greater control over when and where they work. This flexibility can
help employees manage their personal and professional
responsibilities more effectively.
[G]
Professional Development Opportunities:-
Professional development programs, such as training
sessions, workshops, conferences, and tuition reimbursement, support
employees in acquiring new skills, knowledge, and qualifications.
These opportunities can enhance job satisfaction, career advancement,
and employee retention.

Employee Assistance Programs:-

 EAPs provide employees and their families with
confidential counselling, support, and resources for personal and
work-related issues, such as mental health, stress management,
substance abuse, and financial counselling.

Wellness Programs:-
Wellness programs promote employees' physical and
mental well- being through initiatives such as fitness classes, health
screenings, smoking cessation programs, nutritional counselling, and
stress management workshops. These programs can improve
employees' health outcomes and reduce healthcare costs for both
employees and employers.

Employee Discounts:-
Employee discount programs offer employees discounted
rates or special deals on company products or services, as well as
discounts at partner businesses. These discounts can help employees
save money on purchases and increase their loyalty to the company.

Workplace Amenities:-
Workplace amenities, such as on-site fitness centres,
cafeterias, childcare facilities, and recreational areas, enhance
employees' comfort, convenience, and satisfaction at work.

Short Term Incentives:-

Short-term incentives are rewards or benefits offered to
individuals or teams within a relatively brief timeframe to encourage
specific behaviours, actions, or performance. These incentives are
often used by organisations to motivate employees, boost
productivity, and achieve short-term goals.
[E]
Types:-
 Bonuses
 Commission
  Spot Awards
 Recognition Programs
 Performance Awards
 Profit Sharing
 Incentive Trips
 Sales Contests
 Extra Paid Time Off
 Special Perks

Bonuses:-
Lump-sum payments awarded to employees for achieving
individual, team, or company-wide objectives within a short time
frame, such as quarterly or annual performance targets.

Commission:-
Compensation based on a percentage of sales or revenue
generated by an employee, often used in sales roles to incentivize high
performance.

Spot Awards:-
On-the-spot recognition or rewards given to employees
for exceptional performance, contributions, or behaviours.

Recognition Programs:-
Programs that publicly acknowledge and reward
employees for their accomplishments, whether through certificates,
plaques, or verbal praise.
[K]
Performance Awards:-
Monetary or non-monetary rewards given to employees for
surpassing performance expectations or meeting specific performance
criteria.

Profit Sharing:-
 Distribution of a portion of company profits to employees,
typically on an annual basis, based on predetermined formulas or
criteria.

Incentive Trips:-
All-expenses-paid trips or travel rewards given to
employees who achieve predetermined performance goals or
milestones.

Sales Contests:-
Competitive programs designed to encourage sales teams to
exceed targets, often offering prizes, trips, or other rewards to top
performers.

Extra Paid Time Off:-

Additional time off granted to employees as a reward for
achieving certain objectives or for exceptional performance.

Special Perks:-
Temporary benefits or privileges offered to employees as
incentives, such as gift cards, merchandise discounts, or access to
exclusive events.

Advantages of Short-term Incentives:-

 Immediate Motivation
 Flexibility
 Performance Focus
 Employee Engagement
 Cost Control
[U]
Immediate Motivation:-
Short-term incentives provide immediate rewards, which
can serve as powerful motivators for employees to achieve specific
goals or targets within a relatively short timeframe.
 Flexibility:-
Short-term incentives can be quickly implemented or
adjusted to address changing business needs, market conditions, or
performance objectives, allowing organisations to remain agile and
responsive in their reward strategies.

Performance Focus:-
By linking rewards directly to short-term performance
metrics or outcomes, short-term incentives help reinforce desired
behaviours, drive productivity, and encourage a results-oriented
culture within the organisation.

Employee Engagement:-
Recognizing and rewarding employees for their short-
term achievements foster a sense of appreciation, satisfaction, and
engagement, enhancing morale and overall job satisfaction.

Cost Control:-
Short-term incentives can be designed to align with
budgetary constraints or financial performance targets, allowing
organisations to manage compensation expenses more effectively
while still incentivizing high performance.

Disadvantages of Short-term Incentives:-

 Short-Term Focus
 Potential for Disruption
 Risk of Gaming the System
 Limited Impact on Retention
 Budget Constraints
[S]
Short-Term Focus:-
Short-term incentives may encourage employees to prioritize
immediate results over long-term goals or sustainable performance,
potentially leading to a lack of focus on activities that contribute to
the organisation's long-term success.

Potential for Disruption:-

Rapidly changing incentive structures or frequent
introduction of new short-term incentives may create confusion or
disruption among employees, impacting morale, engagement, and
performance consistency.

Risk of Gaming the System:-

Employees may engage in gaming behaviours or short-
term tactics to maximize their incentive pay-outs without necessarily
contributing to the organisation's overall objectives or long-term
success.

Limited Impact on Retention:-

Short-term incentives may have limited effectiveness in
retaining top talent or encouraging long-term commitment to the
organisation, as employees may view them as temporary or
insufficient compared to more substantial long-term rewards.

Budget Constraints:-
Depending on the organisation's financial situation or
budgetary constraints, offering competitive short-term incentives may
not always be feasible, limiting the effectiveness of these programs in
driving motivation and performance.
[H]
Long-term incentives:-
Long-term incentives are rewards or benefits that are
designed to motivate individuals or teams over an extended period,
often spanning multiple years. These incentives are typically tied the
achievement of strategic objectives, long-term performance, and the
overall success of the organisation.
Types:-
 Stock Options
 Restricted Stock Units
 Performance Shares
 Stock Appreciation Rights
 Employee Stock Purchase Plans
 Deferred Compensation Plans
 Long-Term Cash Incentive Plans
 Phantom Stock Plans
 Retirement Benefits
 Executive Perquisites

Stock Options:-
Grants employees the right to purchase company stock at a
predetermined price within a specified period of time.

Restricted Stock Units (RSUs):-

Awards employees shares of company stock that are
subject to certain restrictions, such as a vesting schedule, typically
tied to performance or tenure.

Performance Shares:-
Grants employees shares of company stock based on the
achievement of predefined performance goals or metrics, such as
financial targets or operational milestones.

Stock Appreciation Rights (SARS):-

Provides employees with the right to receive the
appreciation in the value of a specified number of shares of company
stock over a predetermined period.
[A]
Employee Stock Purchase Plans (ESPPs):-
 Allows employees to purchase company stock at a
discounted price, often through payroll deductions, typically offering
favourable tax treatment.

Deferred Compensation Plans:-

Enables employees to defer a portion of their
compensation, such as salary or bonuses, to a later date, often with tax
advantages, providing a long-term savings vehicle.

Long-Term Cash Incentive Plans:-

Provides cash-based awards tied to the achievement of
long-term performance goals or objectives, such as revenue growth,
profitability targets, or shareholder return.

Phantom Stock Plans:-

Grants employees hypothetical units or shares that track
the value of company stock, providing similar economic benefits as
actual stock ownership without issuing shares directly.

Retirement Benefits:-
Offers long-term incentives in the form of pension plans,
401(k) matching contributions, or other retirement savings vehicles to
encourage employee retention and financial security.

Executive Perquisites (Perks):-

Provides high-level executives with non-cash benefits or
privileges, such as personal use of company assets, club memberships,
or executive retirement benefits.
[L]
Advantages of Long-term Incentives are:-
 Alignment with Long-Term Goals
 Retention of Key Talent
 Motivation for Performance
 Attracting New Talent
  Tax Benefits

Alignment with Long-Term Goals:-

Long-term incentives help align the interests of
employees with the long-term objectives of the organisation,
encouraging individuals to focus on sustained performance and the
company's overall success.

Retention of Key Talent:-

Offering long-term incentives can help retain valuable
employees by providing them with a stake in the company's future
success. Employees are more likely to remain committed to the
organisation if they have a vested interest in its long-term
performance.

Motivation for Performance:-

Long-term incentives motivate employees to perform at
their best over an extended period, as the potential rewards are tied to
achieving significant milestones or objectives that may take time to
accomplish.

Attracting New Talent:-

Competitive long-term incentive packages can help
attract top talent to the organisation, as prospective employees may be
enticed by the opportunity to participate in the company's future
growth and success.
[C]
Tax Benefits:-
Some long-term incentives, such as stock options or
restricted stock units. May offer tax advantages for both employers
and employees, depending on the specific structure of the incentive
plan and applicable tax regulations.

Disadvantages of Long-term Incentives are:-

  Complexity and Administration
 Risk of Misalignment
 Cost Considerations
 Retention of Underperformers
 Market Volatility

Complexity and Administration:-

Long-term incentive programs can be complex to
design, implement, and administer, requiring careful planning,
communication, and ongoing management to ensure effectiveness and
compliance with regulatory requirements.

Risk of Misalignment:-
If the objectives or performance metrics used to
determine long- term incentives are not properly aligned with the
organisation's strategic goals, there is a risk that employees may focus
on short-term gains or pursue behaviours that are not in the best
interest of the company's long-term success.

Cost Considerations:-
Implementing long-term incentive programs can be costly
for employers, as they often involve the allocation of significant
financial resources, such as stock grants, bonuses, or profit-sharing
contributions, which may impact the company's profitability and
financial stability.
[A]
Retention of Underperformers:-
Long-term incentives may inadvertently incentivize
underperforming employees to remain with the organisation in hopes
of eventually realizing the rewards, leading to issues with
performance management and organisational effectiveness.

Market Volatility:-
 Certain types of long-term incentives, such as stock
options or equity- based awards, are subject to market fluctuations,
which can impact their value and effectiveness as retention or
motivation tools. Employees may become disillusioned if the value of
their incentives declines due to external market conditions beyond
their control.

Social Security
Social security is a federal government program in the
united states the provides financial assistance to eligible individuals
and their family through retirement benefits, disability benefits,
survivor benefits and supplemental benefits.

Features:-
 Retirement Benefits
 Full Retirement Age
 Early Retirement
 Delayed Retirement Credits
 Disability Benefits
 Survivor Benefits
 Supplemental Security Income
 Cost-of-Living Adjustments
 Funding and Financing
[R]
Retirement Benefits:-
Social Security provides retirement benefits to eligible
individuals who have contributed to the program through payroll
taxes during their working years. The amount of retirement benefits is
based on the individual's earnings history and the age at which they
choose to start receiving benefits.

Full Retirement Age:-

The full retirement age is the age at which individuals
can receive their full Social Security retirement benefits. The FRA
varies based on the year of birth but is currently set at 66 or 67 for
most individuals.

Early Retirement:-
Individuals can choose to start receiving reduced Social
Security retirement benefits as early as age 62, but the benefit amount
is permanently reduced compared to waiting until full retirement age.

Delayed Retirement Credits:-

Individuals who delay claiming Social Security retirement
benefits beyond full retirement age can earn delayed retirement
credits, which increase the monthly benefit amount until age 70.

Disability Benefits:-
Social Security provides disability benefits to individuals
who are unable to work due to a severe and long-lasting disability. To
qualify for disability benefits, individuals must meet certain medical
and work-related criteria.

Survivor Benefits:-
Social Security survivor benefits are available to the
spouses, children, and certain dependents of deceased workers who
were eligible for Social Security benefits. Survivor benefits provide
financial support to surviving family members after the death of a
worker.
[N]
Supplemental Security Income:-
SSI is a federal income supplement program that provides
cash assistance to elderly, blind, and disabled individuals with limited
income and resources. Unlike Social Security benefits, which are
based on work history and contributions, SSI benefits are based on
financial need.

Cost-of-Living Adjustments:-
 Social Security benefits are adjusted annually to account
for inflation and changes in the cost of living.

Funding and Financing:-

Social Security is primarily funded through payroll
taxes collected from employees, employers, and self-employed
individuals under the Federal Insurance Contributions Act.

Retirement Plan:-

Types:-
 Employer-sponsored Retirement Plan
 Individual Retirement Accounts
 Government-sponsored Retirement Plan

Employer-Sponsored Retirement Plans:-

 401(k) Plan
 403(b) Plan
 457 Plan
 Defined Benefit Pension Plan
 Profit-Sharing Plan
 Employee Stock Ownership Plan
[A]
401(k) Plan:-
A defined contribution retirement plan offered by many
employers in the United States, allowing employees to contribute a
portion of their pre-tax salary to a retirement savings account.
Employers may also make matching contributions to the plan.

403(b) Plan:-
Similar to a 401(k) plan but available to employees of tax-
exempt organisations, such as schools, hospitals, and non-profit
organisations.
457 Plan:-
A deferred compensation plan available to employees of
state and local governments and certain non-profit organisations,
allowing them to save for retirement on a tax-deferred basis.

Defined Benefit Pension Plan:-

A retirement plan sponsored by an employer that promises
a specified monthly benefit to employees upon retirement, based on
factors such as salary history and years of service.

Profit-Sharing Plan:-
A retirement plan that allows employers to make
discretionary contributions to employees' retirement accounts based
on company profits or performance.
[G]
Employee Stock Ownership Plan:-
A retirement plan that allows employees to become
partial owners of the company by investing in company stock through
a qualified trust fund.

Individual Retirement Accounts:-

 Traditional IRA
 Roth IRA
 SEP IRA
 Solo 401(k)

Traditional IRA:-
An individual retirement account that allows individuals to
make tax-deductible contributions to their retirement savings, with
contributions and earnings taxed upon withdrawal during retirement.

Roth IRA:-
 An individual retirement account that allows individuals to
make after-tax contributions to their retirement savings, with qualified
distributions tax-free during retirement.

SEP IRA:-
A Simplified Employee Pension IRA that allows self-
employed individuals and small business owners to make tax-
deductible contributions to their retirement savings, with higher
contribution limits than traditional or Roth IRAS.

Solo 401(k):-
A retirement plan designed for self-employed individuals or
small business owners without employees, allowing them to make
contributions as both employer and employee.

Government-Sponsored Retirement Plans:-

 Social Security
 Medicare

Social Security:-
A federal government program that provides retirement,
disability, and survivor benefits to eligible individuals based on their
work history and contributions to the Social Security system.

Medicare:-
A federal health insurance program that provides coverage
for eligible individuals aged 65 and older, as well as certain younger
individuals with disabilities.
[E]