Contrast the different forms of pay given to employees

Employers pay in three broad ways. Short-term benefits such as salaries and bonuses are expensed as the work is done. Post-employment benefits split into defined contribution plans, where the employer's cost is simply the agreed contribution and the employee bears investment risk, and defined benefit plans, where the employer promises a future benefit and so carries the investment, longevity and discount rate risk. Share-based pay includes share grants, restricted shares, options, share appreciation rights and phantom shares. Such pay aligns managers with shareholders but can also reward share price volatility or dilute existing owners. The trap is assuming a plan labelled pension always creates a liability: only a defined benefit promise leaves an obligation beyond the contributions already paid.