A long-term incentive (LTI) is a type of variable compensation that is awarded to employees in the present, but is paid out over time — usually after a year at least, although the average duration is between two to five years. Examples of long-term incentives include stock options, cash, 401(k) retirement plans, restricted stock, and phantom stocks.

LTIs are a great way for companies to draw greater buy-ins from their employees. That said, it is important to note that not all employees are awarded long-term incentives. Those that are are usually considered vital to the company's success. A well-designed long-term incentive plan (LTIP) can help companies attract and retain the best talent, and align the efforts of the workforce so as to meet the company's own long-term goals.