A matter of control

The issue of voting rights relates to control. Owners of controlling business interests usually enjoy certain rights over other owners. These rights may be contractually or statutorily prescribed. For instance, in some states, a simple majority is sufficient for most critical decisions, such as mergers, sales, liquidations and acquisitions. Other states may require a two-thirds or greater majority to approve such actions. These variations can significantly affect the rights of noncontrolling owners and, in turn, the value of their interests.

In addition, when drafting business agreements, attorneys may use voting and nonvoting stock classes, or similar structures (such as general partner and limited partner interests), to segregate a company’s voting rights. These provisions can further limit the influence of owners without voting rights, potentially making their shares less attractive to hypothetical buyers. Conversely, owners with voting rights may be able to influence key business decisions, potentially increasing the value of their shares.

Key question

Voting rights don’t always translate into actual control over business decisions. For example, in a private corporation with a single dominant shareholder, someone who owns 3% of the company’s stock may have little practical influence even if the stock includes voting rights. When comparing voting vs. nonvoting stock, a valuator must first and foremost determine whether the owner of the voting shares can, in fact, derive additional economic benefits from those rights.

If the answer is yes, then voting shares are generally worth more than nonvoting ones. This situation is more common in controlling ownership positions. But each situation is unique, so valuators assess all relevant facts.

If the answer is no, then the matter isn’t as clear. In many cases, voting rights alone may not justify a significant difference in value. The best way to calculate any value differential between voting and nonvoting interests remains a matter of professional judgment, with each case presenting its own facts.

A custom approach

The issue of voting vs. nonvoting share value typically comes into play in shareholder disputes, mergers and acquisitions, and estate planning contexts. Historically, the IRS has suggested that a company’s voting shares may be worth more than its nonvoting shares. However, any premium applied to voting shares (or, conversely, any discount applied to nonvoting shares) can’t be based on speculation or hypothetical scenarios involving specific individuals. Any value differential is typically modest and appropriate only when supported by case facts.

Key factors that valuators consider when quantifying the value differential include:

Ownership structure. If one shareholder controls the company, voting rights may have limited value.

Owners’ agreements and state law. Transfer restrictions, veto rights or supermajority requirements can amplify or diminish voting power.

Distribution rights. If nonvoting shares have identical economic rights to dividends (or distributions) and in liquidation, the discount may be limited.

Voting rights tend to matter more when they can actually be used. For instance, in a potential sale or recapitalization, voting shareholders may have influence over the outcome or timing of the transaction. If no such opportunity exists, voting rights may have minimal incremental value.

Get it right

The value of voting rights isn’t a clear-cut issue. Most valuation professionals agree that, in theory, voting shares may have some incremental value above nonvoting shares. But the magnitude of that difference depends on the facts and circumstances. Careful consideration of ownership rights is essential when structuring transactions, drafting business agreements and planning for the future. Contact us to learn more.

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However, when problems linger without consistent correction, the negative financial impact can slowly and quietly build. That’s why carefully planned and well-executed performance management is imperative.

Everyone is affected

It’s all too easy for employers to underestimate the cost of underperformance — or not even notice it until a crisis develops. When one employee fails to meet expectations, productivity often declines across multiple positions. Missed deadlines, errors and inefficiencies can disrupt workflows and lower customer satisfaction. Over time, these issues may require rework or create other costly delays.

Meanwhile, other employees are likely to pick up the slack. This can lead to increased overtime for hourly workers, higher payroll costs, growing frustration and lower morale. High performers may feel like they’re handling an unfair share of the workload, which can eventually drive them out of your organization.

Indeed, what began as a single employee’s performance issue can evolve into a much wider operational and financial problem. And if multiple staff members are underperforming, the costs can compound. After all, paying full compensation for below-expected output reduces return on payroll investment.

Supervisor stress

Underperforming employees typically demand more attention from supervisors. Repeated conversations, complaints from other employees and customers, and more labor-intensive oversight can consume hours and mental energy that could otherwise be devoted to strategic or revenue-generating activities. And if performance management policies and procedures are unstructured or unclear, these challenges can persist indefinitely.

This often-overlooked cost is easy to miss because it doesn’t appear on financial statements. Some supervisors may not even mention the drag on their productivity because they believe it’s just part of their job. But there’s no denying that time is among every manager’s most valuable resources. When an organization settles for a suboptimal approach to performance management, leadership development and retention may suffer.

Consistency matters

Effective performance management is all about setting clear expectations, documenting deficiencies and providing guidance on how to improve. Consistent, well-constructed policies and procedures help reduce ambiguity, support more predictable decision-making and strengthen your organization’s position in the event of disputes. They also enable you to determine whether an employee is likely to improve or if further adverse action may be necessary.

By addressing issues early and in a structured manner, you can limit the negative effects of underperformance before they escalate. In turn, you’ll likely create a stronger workplace culture where expectations are well-understood, accountability is reinforced and success is celebrated.

Now precisely how your organization should handle performance management depends on many factors — including its industry, size, mission and culture. But it all starts with recognizing the immediate and long-term impact of a well-trained and managed workforce.

It’s financial, too

At first glance, performance management may not seem like a financial issue. However, underperformers can quietly drain your organization’s resources and create operational inefficiencies. Implementing a consistent, well-designed approach helps control costs and minimize risks. We’d be happy to help you evaluate how performance management affects your organization’s financial stability and long-term success.

© 2026

DAFs in action

A DAF is a charitable investment account that generally requires an initial contribution of at least $5,000. It’s typically managed by a financial institution or an independent sponsoring organization, which charges an administrative fee based on a percentage of the deposit.

From a tax perspective, DAFs offer significant benefits. Contributions are generally deductible in the year they’re made (assuming you itemize deductions), even if the funds are distributed to charities in future years. This is particularly valuable in high-income years when you may want to offset income with a sizable charitable deduction but don’t know exactly which charities you’d like to benefit.

Additionally, donating appreciated assets, such as publicly traded stock, allows you to avoid the capital gains tax liability you’d incur if you sold the assets. Yet you can still deduct their fair market value. (Be aware that some DAFs only allow contributions of cash or cash equivalents.)

Another DAF advantage is administrative simplicity. Unlike private foundations, DAFs don’t require the donor to manage compliance, file separate tax returns or oversee grant administration. The sponsoring organization handles recordkeeping, due diligence and distribution logistics, allowing you to focus on your charitable intent rather than administrative burdens.

DAFs can also enhance strategic giving. Funds within a DAF can be invested and potentially grow tax-free, increasing the amount ultimately available for charitable purposes. You can take time to thoughtfully select the charities, involve family members in philanthropic decisions and create a more intentional giving strategy rather than making rushed year-end donations.

Estate planning benefits

Integrating a DAF into an overall estate plan can amplify its benefits. It can serve as a centralized vehicle for a family’s charitable legacy, helping to align philanthropic goals across generations. You can name successor advisors — such as children or other heirs — who can recommend grants from your DAF after your lifetime, fostering continued family engagement in charitable giving.

From an estate tax standpoint, DAFs are also beneficial. Assets contributed to a DAF — whether during your life or at death — are removed from your taxable estate. This can be particularly advantageous for high-net-worth individuals seeking to reduce estate tax exposure while supporting causes they care about.

Additionally, you can designate a DAF as a beneficiary of retirement accounts, such as IRAs. Because these accounts are typically subject to income tax when an individual beneficiary takes distributions, leaving them to a charitable vehicle, such as a DAF, can be tax-efficient. (But think twice before naming a DAF as the beneficiary of a Roth account, because distributions would generally be tax-free to an individual beneficiary.)

Coordination is key

It’s important to coordinate a DAF with your other estate planning strategies. For example, ensure that your charitable intentions are clearly documented and aligned with your overall distribution strategy. We can help structure your DAF contributions and beneficiary designations to maximize both tax savings and philanthropic impact.

© 2026

Start with a coordinated response

Suspicions of employee fraud, whether raised through a whistleblower hotline, internal control procedures or another way, can be unsettling. Acting quickly is important, but don’t act impulsively. Leadership should focus on gathering facts, preserving evidence and involving the appropriate parties early in the process. Consider taking these key steps:

Refer to established policies and procedures. Your organization’s fraud, whistleblower and internal control policies should serve as the starting point. These documents often outline reporting protocols, investigation procedures, and roles and responsibilities. Following established policies helps ensure consistency and demonstrates good governance.

Engage the board at the appropriate level. The executive director or other senior leadership should promptly involve the board or a designated committee, such as the audit or finance committee. The board has fiduciary oversight responsibilities and will typically play a role in determining how the organization proceeds, particularly in more significant or sensitive matters, such as if the potential fraud involves a large amount of money or a member of the leadership team.

Coordinate with legal counsel early. Because employee fraud investigations have legal and employment implications, it’s important to involve legal counsel early in the process. An attorney can help guide decisions around investigative steps, employee rights, confidentiality and potential reporting obligations.

Preserve evidence. Maintaining the integrity of records is critical. This may include securing accounting data, transaction histories, emails and supporting documentation. Access to systems may need to be limited in certain cases. Digital evidence is best handled with input from qualified specialists to avoid unintentional alteration or loss.

Consider engaging financial and forensic specialists. Independent professionals — such as forensic accountants or certified fraud examiners — can help assess the scope of the issue, quantify potential losses and analyze internal control breakdowns. Their work can also support decision-making by management and the board.

Evaluate next steps in consultation with advisors. Decisions such as whether to place an employee on leave, initiate disciplinary action or involve external authorities should be made carefully and typically in consultation with legal counsel and other advisors. These decisions often depend on the strength of available evidence and the specific circumstances involved.

Conduct a structured investigation. Responsibility for the investigation will vary. In many cases, management leads the process with oversight from the board or a committee. If senior leadership is implicated, the board may take a more direct role. Regardless of structure, the investigation should be documented, objective and guided by appropriate expertise.

Address reporting and compliance considerations. Certain situations may trigger reporting or disclosure requirements. For example, significant diversions of assets may need to be disclosed on Form 990, and insurance carriers may require timely notification to support potential claims. Communication with stakeholders — such as donors or grantors — should be handled thoughtfully and in coordination with legal counsel.

Strengthen controls and governance going forward

Once the immediate situation has been addressed, it’s important to step back and evaluate how the fraudulent activity was able to occur. In many cases, employee fraud reveals gaps in internal controls, such as oversight and segregation of duties.

A structured review can help identify:

• Control weaknesses or process breakdowns,
• Opportunities to strengthen financial oversight, and
• Enhancements to policies, training and monitoring.

Addressing these areas not only helps reduce future risk but also reinforces accountability and confidence among stakeholders.

Prepare, protect, respond

Even well-run nonprofits can face employee fraud risk. Having clear policies, strong internal controls and a response plan in place can help reduce this risk and enhance your organization’s handling of a fraud incident should one still occur. If your nonprofit suspects an employee of fraud or wants to proactively strengthen internal controls, contact our team. We can help assess risk, support investigations and implement safeguards.

© 2026

Improve process flow

One of the most immediate ways to boost capacity is through lean manufacturing principles. By identifying and eliminating waste, manufacturers can increase output without additional capital investment.

Value stream mapping is a useful starting point. It allows your team to visualize the entire production flow and pinpoint bottlenecks. Even small adjustments, such as reorganizing workstations or improving material flow, can lead to measurable gains in throughput.

Closely related is the importance of reducing downtime. Equipment failures — often due to inefficient maintenance practices — can significantly limit production capacity. Creating a preventive or predictive maintenance program helps ensure machinery operates at peak performance. Consider implementing a sensor-based monitoring system that provides real-time data on equipment health. It can enable maintenance teams to address issues before they cause costly disruptions.

Invest in smart technology

Technology adoption also plays a critical role in scaling production. Automation, in particular, can dramatically increase output while improving consistency and reducing labor dependency.

Robotics, automated guided vehicles and computer numerical control systems are becoming more accessible even for small to midsize manufacturers. Additionally, manufacturing execution systems and enterprise resource planning platforms provide better visibility into operations. This can enable informed decision-making and tighter production control.

Focus on employee training

Workforce optimization remains essential to maximizing productivity. Cross-training employees allows manufacturers to adapt more quickly to fluctuations in demand and staffing shortages. A flexible workforce can shift between roles as needed, minimizing disruptions and maintaining production flow. At the same time, investing in employee engagement and retention can reduce turnover — a costly issue that directly impacts productivity.

Another often overlooked strategy is optimizing production scheduling. Inefficient scheduling can create idle time, excessive changeovers and missed deadlines. Advanced scheduling tools can help manufacturers sequence jobs more effectively, balancing workloads across machines and shifts. This not only can increase capacity but also can improve on-time delivery performance, which is critical for maintaining strong customer relationships.

Bolster supply chain management

Production capacity is only as robust as the availability of raw materials and components. Strengthening relationships with suppliers, diversifying sourcing strategies and maintaining appropriate inventory levels can help prevent disruptions that stall production.

In addition, manufacturers can enhance supply chain resilience by increasing visibility across their supplier networks. Digital tools that provide real-time tracking of shipments, inventory levels and supplier performance enable faster responses to disruptions.

Also consider building strategic safety stock for high-risk items. This requires balancing the carrying costs against the potential impact of shortages. Together, these efforts create a more agile supply chain that supports consistent production output even in uncertain conditions.

We’re here to help

Expanding production capacity doesn’t always require a large capital outlay. In many cases, the greatest opportunities lie in refining existing processes, leveraging technology strategically and empowering employees. If you need help evaluating the costs vs. benefits of various approaches, contact us. We can also identify tax incentives for equipment investments and help ensure that growth initiatives align with your manufacturing company’s broader financial goals.

© 2026

Please review the calendar and let us know if you have any questions about the deadlines or would like assistance in meeting them.

June 15

• File a 2025 individual income tax return (Form 1040 or Form 1040-SR) or file for a four-month extension (Form 4868) if you live outside the United States and Puerto Rico or you serve in the military outside those two locations. Pay any tax, interest and penalties due.
• Pay the second installment of 2026 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding.

September 15

• Pay the third installment of 2026 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding.

September 30

• If you’re the trustee of a trust or the executor of an estate, file an income tax return for the 2025 calendar year (Form 1041) if an automatic five-and-a-half-month extension was filed. Pay any tax, interest and penalties due.

October 15

• File a 2025 individual income tax return (Form 1040 or Form 1040-SR) if an automatic six-month extension was filed (or if an automatic four-month extension was filed by a taxpayer living outside the United States and Puerto Rico or serving in the military outside those two locations). Pay any tax, interest and penalties due.
• Make contributions for 2025 to certain retirement plans or establish a SEP for 2025 if an automatic six-month extension was filed.
• File a 2025 gift tax return (Form 709) if an automatic six-month extension was filed. Pay any tax, interest and penalties due.

December 31

• Make 2026 contributions to certain employer-sponsored retirement plans.
• Make 2026 annual exclusion gifts (up to $19,000 per recipient).
• Incur various expenses that potentially can be claimed as itemized deductions on your 2026 tax return. Examples include charitable donations, medical expenses and property tax payments.

© 2026

As medical costs continue to rise, extended care can place a major financial strain on individuals and families. Sponsoring LTC coverage may help reduce this potential source of stress, which often adversely affects productivity and work quality. Such a benefit can also attract top job candidates and boost retention of key employees. Of course, it’s critical to explore the details first.

Two common approaches

Employers may sponsor LTC insurance as either traditional standalone policies or through life-insurance-based products that include LTC benefits or riders. Although policy terms vary, qualified coverage generally pays benefits when a covered party is certified by a licensed health care practitioner as chronically ill.

This can mean, for example, that the person is expected to require substantial assistance with at least two of the six activities of daily living for at least 90 days, or that the individual has severe cognitive impairment requiring supervision. For employer-sponsored policies, the employee who enrolls in the benefit is generally the covered party, though some policies may allow spouses or others to obtain coverage.

Under either the standalone or life-insurance-based approach, care may be provided in:

• The covered party’s home,
• An assisted living or nursing facility, or
• Another covered setting, depending on the policy’s terms.

But there’s a key difference between the two. Standalone LTC policies typically don’t provide a death benefit unless optional features are included. In contrast, life-insurance-based LTC products may include cash value and a death benefit that can be reduced or accessed to help pay for covered LTC, depending on the policy design. If LTC benefits aren’t used, a death benefit may remain available for designated beneficiaries. These products also sometimes offer optional features, such as riders and flexible payment structures.

In either case, qualified LTC coverage generally receives favorable tax treatment. Depending on plan design, premiums may be paid by the employer, the employee or shared between both. Employer-paid premiums are typically deductible as a business expense, and employees usually receive benefits free of federal income tax, subject to applicable IRS rules and limits. (Note: Qualified LTC insurance generally can’t be offered as a pretax benefit through a Section 125 cafeteria plan, so employee-paid premiums are typically funded on an after-tax basis.)

Why employees value it

Employees may value LTC insurance as a fringe benefit for several reasons. First, employer-sponsored coverage often offers more competitive pricing than employees would find on their own. Individual LTC policies can be expensive, so access to a workplace-sponsored option may make coverage more attainable for some employees.

Employer-sponsored coverage may also offer underwriting advantages. In some cases, insurers use simplified underwriting for group policies, with some providing broader enrollment opportunities than employees would find on the individual market. However, these features vary by insurer and policy.

Finally, buying LTC insurance through the workplace may be more convenient than shopping for coverage independently. As the employer-sponsor, you’ll handle much of the upfront evaluation of providers and plan options, and a payroll deduction arrangement may make premium payments easier for participants.

Worth considering

LTC insurance may not be a viable employee benefit for every organization. However, it’s worth considering if you want to expand your benefits package and have a workforce likely to value it. Contact us for help determining whether sponsoring a policy for your employees would be a sound financial and strategic move.

© 2026

Without proper planning, your loved ones may face significant legal and logistical challenges in accessing or managing them. By taking steps now to inventory your digital assets and incorporate them into your estate plan, you can help ensure a smoother transition and protect your legacy in the digital age.

What digital assets do you possess?

The first step in planning for digital assets is to identify all online accounts and digital property you own. Financial accounts, such as online bank and brokerage accounts, should be listed alongside nonfinancial assets like email accounts, social media profiles, subscription services and cloud storage. Don’t forget emerging asset classes such as cryptocurrencies or monetized digital content.

For each asset, detail how to access it, including usernames, passwords and any multi-factor authentication methods. This sensitive information should be stored in a secure location, such as a password manager or encrypted document, rather than directly in your will.

How do you want the assets to be handled?

You may want certain accounts memorialized, deactivated or deleted altogether. Many platforms, including Facebook and Google, allow users to designate legacy contacts or set instructions for account management after death. Taking advantage of these tools can simplify the process for your loved ones.

Also consider designating a family member or friend to manage your digital assets. You can give this person, sometimes referred to as a “digital executor,” the authority through your will or a separate legal document, depending on your state’s laws. His or her role is to carry out your instructions, access accounts and ensure that digital property is handled appropriately. Be sure to discuss your wishes with this individual in advance so he or she understands the responsibilities.

Any legal considerations?

Laws governing access to digital assets vary by state, and service providers often have their own policies that limit what can be shared. Fortunately, there are laws that govern access to digital assets in the event of your death or incapacity. Most states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which provides a three-tier framework for accessing and managing your digital assets:

1. The act gives priority to providers’ online tools for managing the accounts of customers who die or become incapacitated. For example, Google offers an “inactive account manager,” which allows you to designate someone to access and manage your account. Similarly, Facebook allows users to determine whether their accounts will be deleted or memorialized when they die and to designate a “legacy contact” to maintain their memorial pages.
2. If the online provider doesn’t offer such tools, or if you don’t use them, access to digital assets is governed by provisions in your will, trust, power of attorney or other estate planning document.
3. If you don’t grant authority to your representatives in your estate plan, then access to digital assets is governed by the provider’s Terms of Service Agreement.

To ensure that your loved ones have access to your digital assets, use providers’ online tools or include explicit authority in your estate plan.

More questions?

By taking a proactive approach to digital asset planning, you can reduce uncertainty, avoid unnecessary complications and provide clear guidance for your loved ones. A well-structured plan can protect the financial value of your digital property and help ensure that your personal legacy is handled according to your wishes.

We can answer your questions on properly addressing digital assets in your estate plan. Contact us today to learn more.

© 2026

How to diversify funding streams

Financially healthy nonprofits maintain a mix of funding sources, generally with no single stream accounting for more than 25% to 30% of total revenue. If your organization’s revenue is heavily concentrated, consider these steps to strengthen your position:

Inform the board. Boards can sometimes be cautious about adding new revenue streams, especially if they involve unfamiliar strategies or risk. Use clear, visual data — such as a simple pie chart that shows revenue composition — to highlight overreliance on a single source and make a stronger case for diversification.

It’s also helpful to compare your organization’s funding mix with that of similar nonprofits. Pair this with financial projections showing how future expenses stack up against current and potential revenue scenarios. Demonstrating how the loss of a major funding source could impact your mission can be a powerful motivator for change.

Identify and evaluate new opportunities. When exploring new revenue sources, cast a wide net. Options might include individual giving, grants, corporate partnerships, earned income, fundraising events or digital campaigns. Carefully weigh the pros and cons of each opportunity. Consider staffing needs, startup costs, administrative complexity and potential tax implications (such as unrelated business income). Just as important, evaluate how well each option aligns with your mission and audience. For instance, research whether the funders or partners you’re targeting have a history of supporting organizations like yours.

Balance growth with capacity. Diversification is important, but more isn’t always better. Each new revenue stream requires time, planning and ongoing management. Spreading your team too thin can reduce overall effectiveness. Develop a clear plan for each initiative, including budgets, staffing requirements, systems and marketing efforts. Establish timelines with measurable milestones to track progress and make informed adjustments. And focus on a manageable number of high-potential opportunities rather than trying to pursue everything at once.

Monitor performance. Regular review is essential to ensure each revenue stream supports your mission and financial goals. Monthly check-ins can help assess whether a source is meeting expectations, exceeding costs or underperforming. Look at both financial results and operational impact. Are certain efforts consuming disproportionate staff time? Are returns improving over the long-term? Ongoing evaluation allows you to refine your approach and reallocate resources where they’ll have the greatest impact.

An ongoing effort

It’s no guarantee that every revenue idea will succeed — and that’s OK. If a funding source consistently underperforms or strains your team, it may be time to step back and redirect your efforts. Thoughtful diversification isn’t about adding more revenue streams for the sake of it; it’s about building a balanced, sustainable funding model that supports your mission over time. We can help evaluate your current revenue structure and explore possible diversification strategies.

© 2026

1. Determine eligibility. Many construction businesses limit their incentive programs to high-level executives and other key employees who are essential to landing, managing and completing projects. Typically, these are individuals with critical relationships, hard-to-find skills and institutional knowledge. The costs of replacing such employees — which include recruiting, hiring, onboarding and training — would likely exceed the cost of incentive compensation that keeps them on the team.

Offering a cash bonus or another type of incentive to lower-level workers may also pay off in productivity and retention, especially during jobsite labor shortages. When offering incentives to nonexempt employees, however, be sure to confirm that the program complies with applicable overtime and wage-and-hour rules.

And you don’t necessarily have to offer cash bonuses. Instead, you might reward top performers with noncash items, such as personalized gear, or high-quality boots or tools purchased at supplier discounts. Just be sure such rewards are structured and administered properly: Noncash compensation can still raise tax, payroll or wage-and-hour considerations in some cases.

2. Identify the right reward triggers. It may be tempting to tie incentives directly to profits, but this can backfire. You might inadvertently incentivize behaviors that harm your construction company in the long run. For instance, project managers might opt for lower-quality materials to cut costs and meet profitability goals.

Generally, a better approach is to choose triggers that align with business-specific goals and each employee’s job description. Incentives for project managers, for example, might be triggered by:

• Consistently meeting deadlines,
• Staying on budget without sacrificing standards, and
• Achieving clearly defined quality, customer service and safety objectives.

It’s worth repeating, however, that basing an incentive on any one of these priorities could push some project managers to cut corners and raise project risk. Consider offering tiered incentives that provide greater rewards as accomplishments become more difficult. Also, exercise caution with safety-based incentives to ensure they encourage best practices, training and hazard reporting — not underreporting incidents.

3. Establish metrics. Carefully choose and implement key performance indicators (KPIs) to assess whether incentives have been earned. Announce the baseline for these metrics at the program’s inception, so you and employees have specific measures to compare against.

Pick KPIs that are straightforward and understandable for the applicable workers. Examples might include:

• Labor efficiency,
• Rework rates,
• Project completion time,
• Budget performance, or
• Safety training and hazard mitigation.

Make each metric’s goal attainable but not too easy. Include some room for subjectivity, too. Doing so can help ensure employees assigned the toughest goals aren’t unfairly disadvantaged by project complexity or factors that are out of their control, such as weather delays, materials shortages or change orders.

4. Determine incentive structure. Incentive compensation typically comes in the form of cash, equity or a combination of the two. Cash bonuses are a relatively straightforward motivational tool for both employers and employees. However, you must carefully forecast their impact on your construction business’s cash flow. In addition, cash bonuses are generally taxable as wages when paid, and employers must follow the appropriate payroll withholding rules. So, you’ll want to prepare participants for this eventuality as part of a clear program communication strategy.

Equity rewards include restricted stock units, stock options and phantom stock. They usually vest based on years of service or satisfaction of performance goals. To offer actual stock, your construction business generally must be organized as a C corporation. Indeed, the right long-term incentive depends on your entity type. Contractors operating as S corporations, limited liability companies or partnerships may need to consider alternatives to traditional stock compensation.

The tax treatment of equity-based incentives varies significantly. Depending on the award type, taxation may occur at vesting, exercise, settlement or payout. And some arrangements may trigger current tax consequences or special compliance requirements. Nonetheless, equity incentives give employees a stake in company performance and can increase the likelihood that they’ll stick around to participate in your business’s long-term success.

When feasible, a combination of cash and equity can be a highly effective motivator. But you’ll need to design a program like this with great care and in consultation with your professional advisors.

5. Time cash payouts strategically. Remit cash bonuses as close as possible to the performance being rewarded. Many businesses offer annual bonuses as a year-end gift, but employees may come to expect them as a matter of course rather than as an incentive to go above and beyond.

To truly connect the reward to the desired behavior or achievement, consider dividing cash bonuses into monthly or quarterly payouts. Doing so can keep workers engaged with the program and improve retention. That said, the appropriate payout schedule should reflect the nature of your company’s cash flow, its administrative capacity and the goals you’re measuring.

6. Evaluate results and continuously improve. The last “step” in the rollout of any incentive compensation program is to recognize that it’s probably not a finished product. You and your leadership team should review its results, assess its financial impact and make adjustments as necessary.

If you’re interested in exploring incentive compensation options, contact us. We can help design or refine a program to align with your construction company’s goals, address tax implications and regulatory compliance, and evaluate its ongoing efficacy.

© 2026