What is it:
LTIP is the umbrella term for the portion of a compensation package delivered through multi-year vehicles rather than immediate cash. RSUs, PSUs, and Stock Options are all instruments that live within an LTIP. The specific mix a company uses is a deliberate design choice. When a company says "your LTIP is $300,000," it's naming the total annual value of long-term incentive awards, a single number that can represent several different instruments, each vesting and behaving differently, not one uniform grant.
Why does it matter:
LTIP exists because companies want to align a meaningful share of executive pay with multi-year performance and retention. For most senior executives, LTIP represents the largest single component of total compensation. For this reason, a comprehensive understanding of your LTIP's components and the mechanics of the different components matters more than understanding any single bonus or salary detail.
What do people most often get wrong:
People often treat "LTIP" and "equity compensation" as interchangeable. They're not always the same: some LTIPs can include cash-based long-term incentives or "equity-like" instruments (e.g. phantom equity) alongside or instead of actual equity. This is particularly true at private companies.