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HR Glossary

Long-term
incentive (LTI)

Pay and remuneration
What is a long-term incentive (LTI)?

A long-term incentive is variable pay earned over multiple years, usually three or more, delivered as equity (performance rights, options, RSUs) or multi-year cash, and vesting only if service and performance conditions are met. It exists to pay for decisions whose results take years to land.

Why LTIs exist

Annual incentives reward what lands this year, which quietly punishes the decisions that matter most: platform investments, market entries, hard restructures whose payoff arrives in year three. LTIs correct the horizon by making a meaningful slice of pay contingent on multi-year outcomes, aligning senior decision-makers with owners on the timescale owners actually care about. That is why LTI weight rises with seniority: the more someone's choices shape the long term, the more of their pay should live there.

The common structures

Performance rights (shares delivered if multi-year hurdles are met, relative shareholder return and earnings-per-share growth being the listed-company staples), plain time-vested equity (retention-weighted, common below executive level), options (growth-leveraged), and phantom or cash LTIs for private companies that cannot or will not issue equity. Deferral and clawback increasingly ride along, especially in regulated sectors where accountability regimes require variable pay to remain at risk for years.

What to watch in design

Hurdles that measure luck (commodity prices, index movements) rather than management contribution; cliff structures that concentrate everything on one measurement date; and complexity that defeats the purpose, an LTI the executive cannot explain is not changing any decisions. The governance test runs the other way too: an LTI that pays out through a period shareholders experienced as failure will be quoted back at the board for a decade.

Next step

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Short-term incentive (STI)

A short-term incentive is variable pay earned over a year or less, usually an annual bonus against a scorecard of individual, team and company measures, expressed as a target percentage of salary.

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Equity compensation

Equity compensation is pay delivered as ownership rather than cash: shares, options, restricted stock units or other rights whose value tracks the company.

Read the definition →Related term

Vesting

Vesting is the process by which promised equity or benefits become actually owned over time.

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Clawback

A clawback is a contractual right to recover pay already delivered (or cancel pay already promised) when defined conditions occur: leaving early after a sign-on, misconduct, misstated results, or risk failures that surface later.

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All terms

Every definition, with the local rules, rates and thresholds attached.

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Where
Compono Engage fits.

Compono Engage is an employee engagement platform that reads culture and climate alongside work personality, team by team.

Long-term value needs people who stay long-term. Design for it.

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Compono Engage
8%+
reduction in turnover

Common questions

Who usually receives LTIs?

Executives and senior leaders as standard, extending deeper in equity-rich companies where retention is the goal. Below decision-making roles, time-vested equity usually serves better than performance hurdles.

How is an LTI different from a retention bonus?

Both pay for staying, but an LTI also pays for multi-year performance and is usually equity-linked. A retention bonus rents time; an LTI buys aligned time.

This page is general information, not legal advice. We check figures annually and update them on a best-efforts basis, but employment rules change and we cannot promise everything here is current or complete. Before you act on it, confirm the detail with the official source for your jurisdiction or your own adviser. Last reviewed July 2026.