Cross-Border Incentive Plans: One Size Does Not Fit All

To recruit and retain highly skilled and experienced executives, companies must offer innovative and attractive compensation packages. Variable compensation is an increasingly important element of overall remuneration as businesses seek to link remuneration to performance over both the short and long term.

Businesses with cross-border operations often seek to harmonize compensation packages for senior level employees where possible. As a result, it is common for such organizations to have Canadian employees participate in existing U.S. long-term incentive plans.

There are, however, several key differences between the tax and employment laws in the U.S. and Canada (and even differences between jurisdictions within Canada). These differences mean that incentive plans drafted to comply with U.S. rules and best practices may need to be modified for use in Canada to ensure that the arrangement meets the business objectives on both sides of the border and does not result