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) is usually a bonus paid within a year (quarterly or annual). LTI (Long‑Term Incentive) is a multi‑year reward (often equity, performance shares, or cash plans tied to 2–4 year goals).

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 you don’t know the company factor, test 0.8, 1.0, 1.2 to see a range.

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 is often quoted as a grant value (e.g., $30k in RSUs) but paid over time (vesting). For planning, the useful number is the expected value per year:

Annualised LTI ≈ Grant value ÷ Vesting years

Worked LTI example (simple)

Grant value: $30,000
Vesting: 3 years

Annualised LTI ≈ 30,000 ÷ 3 = $10,000 per year

Why “LTIP calculator” pages often don’t index

Many sites create multiple near‑duplicate “LTIP calculator” pages (yearly, quarterly, percentage, STI, LTI). Google usually indexes one and ignores the rest. The better play is one strong calculator page + guides like this one that build authority.

Last updated: 2026-03-01

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	One year or less	Three to five years
Paid in	Cash	Equity, usually — RSUs, options or PSUs
Typical size	10–40% of salary	0% for most staff, 50–400% at executive level
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	Often forfeited if before the payment date	Unvested awards almost always forfeited
Taxed	As income when paid	Usually as income at vesting, then capital gains on later growth

The practical difference for an offer: STI is money you can plan around within twelve months. LTI is a claim on value that only becomes real if you stay, and if the share price cooperates. Discounting LTI heavily when comparing offers is rational, not pessimistic.

Last reviewed 20 August 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 is a short-term incentive: cash earned over a year or less against annual targets. LTI is a long-term incentive: equity or cash vesting over three to five years, usually tied to share price or multi-year financial goals.

Is LTI better than STI?

They serve different purposes. STI is predictable cash within twelve months. LTI can be worth far more but carries market risk, vesting risk and forfeiture risk if you leave. Most people should discount LTI when comparing offers.

Do all employees get LTI?

No. Long-term incentives are usually reserved for senior management and executives, though technology companies commonly extend equity much further down the organisation.

How is LTI taxed?

Usually as ordinary income at vesting, based on the value at that date, with any subsequent growth taxed as capital gains when the shares are sold. Rules vary significantly by country and by award type.

What does STI and LTI mean in salary?

They are the two variable parts of total compensation alongside base salary. STI is the annual cash bonus and LTI is the multi-year equity award. A total compensation statement typically shows base, STI target and LTI grant value as three separate lines.