STI vs LTI: Short-Term vs Long-Term Incentive Explained

STI vs LTI: what they mean (and how to estimate them)

STI (Short-Term Incentive) normally measures performance over a short period such as a quarter or year. LTI (Long-Term Incentive) is an award whose value or vesting depends on a longer period. Either label needs the employer’s plan terms to explain the actual payout.

Quick definitions

STI: annual/quarterly bonus tied to KPI/OKR performance, company results, and sometimes manager rating.
LTI: value delivered over time (vesting) tied to longer‑term outcomes (growth, profitability, TSR, retention).

When companies use each

STI is common for broad employee groups (sales, ops, corporate roles).
LTI is common for leadership and key roles where retention matters.
Some plans combine both: STI drives this year’s execution, LTI drives multi‑year outcomes.

STI: a simple formula you can model

A common pattern is:

STI payout = Base salary × Target bonus % × Performance rating × Company factor × Proration

If the company factor is unknown, 0.8, 1.0 and 1.2 are illustrative sensitivity scenarios, not forecasts or standard plan outcomes.

Worked STI example

Base salary: $80,000
Target bonus: 10%
Rating: 1.1×
Company factor: 0.95×

STI = 80,000 × 0.10 × 1.1 × 0.95 = $8,360

LTI: how to think about it

LTI may be quoted at its grant-date value (for example, $30,000 in restricted shares) but delivered on a vesting schedule. Dividing the grant-date value by years is only a comparison aid when the award vests evenly; it is not guaranteed cash or an expected market value:

Simple grant-date allocation = Grant-date value ÷ Vesting years, if evenly scheduled

Worked LTI example (simple)

Grant value: $30,000
Vesting: 3 years

Simple grant-date allocation = 30,000 ÷ 3 = $10,000 per scheduled year. Actual vesting dates, performance conditions and share value can change what you receive.

Compare the two awards without double-counting

For an $80,000 base salary, an $8,000 STI target and a $30,000 LTI grant vesting evenly over three years, the simple annual target comparison is $80,000 + $8,000 + $10,000 = $98,000. That is a comparison of salary, target cash and grant-date allocation — not guaranteed annual pay. Check the STI performance rules and the LTI vesting schedule separately.

Model the cash target with the STIP calculator and the multi-year award with the LTIP calculator.

Last updated: 2026-10-08

Want to test scenarios quickly? Use a calculator and copy the result link to save your numbers.

For a full walkthrough that connects attainment, payout curves, formulas, and worked examples, read How sales bonuses are calculated.

STI and LTI side by side

	STI (short-term incentive)	LTI (long-term incentive)
Period	Often one year or less	Multiple years under the plan
Paid in	Cash	Equity, usually — RSUs, options or PSUs
Amount to compare	Target award under the plan	Grant-date value, vesting schedule and possible value at delivery
Measured on	Annual company, team and individual results	Share price, total shareholder return, multi-year financial goals
Risk	Result risk within one year	Result risk plus market risk plus forfeiture risk
If you leave	Check service and payment-date conditions	Check vesting, good-leaver and forfeiture clauses
Tax treatment	Depends on jurisdiction and payroll	Depends on award type, jurisdiction and timing

The practical difference for an offer: compare fixed salary, STI target and LTI grant value separately. Ask what conditions must be met for each award and when it can actually be paid or vested.

Last reviewed 8 October 2026

Reading both on a total compensation statement

Separate guaranteed from at-risk. Base salary is guaranteed. STI target and LTI grant value are not, and a statement that adds all three into one headline number is overstating what you will actually receive.

Check whether LTI is shown as grant value or annualised. A $150,000 grant vesting over three years is $50,000 a year, not $150,000 this year.

Find the vesting schedule. Four-year vesting with a one-year cliff means nothing at all if you leave in month eleven.

Check for performance conditions on the LTI. PSUs that only vest if a TSR target is met can pay zero even if you stay the full period.

Model each separately: STIP calculator for the short-term half, LTIP calculator for the long-term half. Definitions: what is an STI bonus · what is LTI.

STI and LTI questions

What is the difference between STI and LTI?

STI measures a shorter performance period, often a quarter or year. LTI covers a longer period and may be equity or cash. Award conditions and timing vary by plan.

Is LTI better than STI?

They serve different purposes. Neither is automatically better. STI and LTI have different performance periods, payment conditions and risks; compare the actual plan terms and vesting schedule.

Do all employees get LTI?

No. Eligibility depends on the employer and plan; some award LTI only to selected roles, while others offer equity more broadly.

How is LTI taxed?

Tax treatment depends on the award type, jurisdiction and timing. Check the plan and local payroll or tax guidance instead of assuming every LTI grant is taxed at vesting.

What does STI and LTI mean in salary?

STI and LTI can appear alongside base salary as separate variable awards. STI is shorter-term; LTI is multi-year. Compare the STI target and LTI grant value without treating either as guaranteed salary.