Deferred Compensation definition

Deferred compensation is a proportion of money paid out later than what would be normal in order to benefit from preferential tax treatment.

Pensions are the most common deferred compensation. Company stock is another form – employees are given company stock instead of money (which would get taxed), which can then be sold at a later date. The disadvantage with this is that the share price could go down, which may mitigate any tax benefits.