What is Deferred compensation
When a part of an employee’s compensation is put aside to be given to them later on, that is known as deferred compensation. Pension plans, retirement plans, and stock options are all considered deferred compensation.
The reason that many staff choose to have their compensation deferred is that it gives them a tax break. The tax on that income is usually delayed until it is paid out, for example, at the time of retirement. At that time, the individual may be in a lower tax bracket and therefore pay less tax on the same income. Employees may also select it as an automatic way to save that they don’t have to manage themselves.