Insights

Incentive remuneration structures: single incentive plan (SIP) vs short-term (STI) and long-term (LTI) incentives

March 2026

Across the 80+ listed JSE companies we cover, two different models are used to incentivise management and assess performance. Both frameworks are designed to support talent retention, align interests of shareholders and management, and drive improvement in company performance. However, the models differ in design and, depending on company context and industry, one may be more suitable than the other.

STI/LTI model

STI rewards annual performance while LTI rewards sustainable performance over a longer period, typically 3-5 years.

Distinguishing features of STI/LTI model:

  • Clear accountability – given that STIs and LTIs are assessed and rewarded over different performance periods, underperformance in one period is harder to mask, for example, if short-term targets are achieved but long-term outcomes are not, there should be zero payout for the LTI; greater level of accountability, which is often softened with SIP
  • Easier comparability – most JSE-listed companies use STI/LTI structures, allowing shareholders to benchmark pay levels and align performance criteria to peers more easily than with infrequently used SIP.

Instances where STI/LTI model works best

  • When a company operates in an industry that is volatile, growing quickly or driven by factors that are changing rapidly, eg technological advancements:
    • Due to the model’s strong emphasis on pay for performance, management is incentivised to create long-term value by achieving short-term goals and faces the risk of not receiving any awards if performance outcomes are not achieved; structure can encourage a higher level of risk, where appropriate, supporting rapid growth
    • If structured correctly, short-term performance should feed into achieving long-term goals, driving sustainable growth
  • Company is a startup growing quickly, or is in a turnaround phase:
    • When a company’s growth trajectory is variable or it faces heightened risk, using two incentive structures assessed over different periods can make it easier to determine where value is being created and where management focus needs to be strengthened
    • STIs can be adjusted annually to account for market conditions, while LTIs link performance to long-term value, encouraging management to invest in expansion and transformation
  • Rewarding outperformance against the market or competitors:
    • Given that the model is commonly applied by listed companies, performance criteria can be set against market peers.

SIP model

SIP combines STI and LTI into one structure, with performance typically assessed over one year. Payouts are made partly in cash and partly in shares, with vesting over 3-5 years.

Distinguishing features of SIP model

  • Simplicity of structure – there is only one scorecard, making it easier for shareholders to understand remuneration framework and track performance year on year
  • Management interests protected – executive rewards are more certain, ie once annual targets are met, rewards are secured; deferred shares retain their base value, even if the share price subsequently falls, unlike a traditional LTI which may lapse with no value
  • Unified focus – aligns short- and long-term objectives, reducing the risk that executives optimise annual results (eg annual EBITDA for an STI payout) at the expense of longer-term outcomes such as capital discipline or balance-sheet health.

Instances where SIP model works best

  • Highly regulated industries:
    • Tight regulations lend a measure of predictability to managing operations and hence earnings
    • SIP provides a framework that supports steady value-creation for industries where rapid expansion is restricted and high-risk strategies discouraged
  • Mature industries where market dynamics and growth are relatively stable:
    • Earnings are relatively predictable (eg healthcare sector)
  • Company aims to reduce employee turnover through consistent rewards:
    • Since rewards are generally more certain under SIP, this incentive model may support staff morale in situations where share-price hurdles are difficult to achieve.