Total Target Cash
What Is Total Target Cash?
Total Target Cash (TTC) is the total value of all cash compensation an employee receives if they achieve the expected results, which includes the annual base salary and target performance-based bonus. This type of pay mix is common in sales and executive compensation. Total Target Cash provides a clear picture of how much money an executive stands to make over the course of their employment with your company.
What does Total Target Cash include?
Total Target Cash is the total amount of the annual salary, commission, and bonuses an employee receives when they reach their targets. In this case, the annual salary is the base pay, and the other target cash incentives are variable pay.
How is Total Target Cash calculated?
Total Target Cash is calculated by adding one year's base salary and target bonus and/or commission. The target cash incentive is what an employee gets, given that they achieve 100% of their target. The total target cash formula is:
Total Target Cash = Base Salary + Target Bonus and/or Commission
Total Target Cash vs Total Target Compensation
At a high level, Total Target Cash and Total Target Compensation are similar because they both represent the amount of money an employee can expect to make from their job. However, there are some important differences between the two.
Total Target Cash includes base salary, bonus, and/or commission. Total Target Compensation includes base salary, bonus, equity, and other forms of monetary compensation (e.g., stock options). In other words, Total Target Compensation also includes long-term incentives.
There's also a difference between how each is calculated:
- Calculating Total Target Cash is more conservative because it doesn't include any potential changes in the stock price or volatility of your company's valuation during the vesting period of equity awards.
- Calculating Total Target Compensation involves using historical data on company values to estimate future expectations for comp if everything goes well with their performance reviews or after they've been granted new shares in connection with an acquisition/IPO, etc.