What is LTI (long-term incentive)?
LTI is the part of a compensation package people most often misjudge — both by over-valuing the headline grant and by under-valuing what it compounds into. Here is what it means and how to read one.
Short answer
LTI stands for long-term incentive. It is compensation earned over a multi-year period — typically three to five years — and paid in equity (shares, RSUs, options, performance units) or occasionally deferred cash. LTIP is the plan document behind it. Unlike an STI bonus, LTI does not pay out at the end of one year: it vests in instalments, and you generally forfeit anything unvested when you leave.
The four common forms of LTI
| Instrument | What it is | Value if the share price falls |
|---|---|---|
| RSUs Restricted stock units |
A promise of shares delivered on a vesting schedule. | Still worth something — the shares just cost less. |
| Stock options | The right to buy shares at a fixed strike price. | Can be worth exactly zero if the price sits below the strike. |
| PSUs Performance share units |
Shares delivered only if multi-year targets (TSR, EPS) are met. | Can be zero if targets are missed, regardless of price. |
| Deferred cash | A cash amount paid out over several years. | Unaffected by share price; still forfeited if you leave early. |
How vesting actually works
Vesting is the mechanism that makes LTI a retention tool rather than a bonus. Two patterns cover most plans:
Worked example: what a grant is worth per year
An offer quotes $180,000 base + 20% STI + $240,000 LTI vesting over 4 years.
The $240,000 headline is not annual pay. Annualised, it is $60,000 — and in year one you may receive nothing at all if there is a 12-month cliff. Educational estimate only.
Model grant value and vesting in the LTIP calculator →
LTI vs STI at a glance
| STI / STIP | LTI / LTIP | |
|---|---|---|
| Period | One year or less | Three to five years |
| Paid in | Cash | Equity, units or deferred cash |
| Measured on | Annual company and individual results | Multi-year TSR, EPS, growth |
| If you resign | May forfeit the current year | Forfeit everything unvested |
| Certainty | Known within months | Unknown for years |
| Who receives it | Most salaried staff | Senior and executive levels |
Questions to ask before valuing an LTI offer
Related tools
Frequently asked questions
What does LTI stand for?
LTI stands for long-term incentive: compensation earned over a multi-year period, usually three to five years, and typically paid in equity.
What is the difference between LTI and LTIP?
LTI is the incentive itself; LTIP is the long-term incentive plan document that governs how grants are made and vested. The terms are used interchangeably.
What does LTI mean on a payslip?
An LTI line usually records the value of equity that vested in that period. It appears as taxable income even though you received shares rather than cash, which is why the tax deducted can look disproportionate.
Is LTI guaranteed money?
No. Unvested LTI is forfeited if you leave, performance-based awards can pay zero if targets are missed, and options are worthless if the share price stays below the strike price.
How is LTI different from an STI bonus?
STI is annual cash tied to one year of performance. LTI is multi-year, usually equity, and vests in instalments. STI is paid and finished; LTI keeps you tied to the company.
What is a typical LTI amount?
It scales sharply with seniority — often nothing below director level, then roughly 20-50% of base for directors and several times base salary for executives. It varies enormously by industry and whether the company is public.