Netflix's cash bonuses become salary thanks to new tax plan

Netflix just decided to lump all cash payments into salaries - thanks to tax. Photo / 123RF

Netflix's top executives will now get paid in full no matter how the company does, thanks to the Republican tax plan.

The streaming-video provider is scrapping its cash bonuses, instead making the payments to top executives as salary.

The recently passed tax plan eliminates companies' ability to deduct performance-based bonuses to managers who are paid more than US$1 million (NZ$1.4m), so Netflix just decided to lump all cash payments into executives' salaries.

Netflix implemented the cash bonus structure in 2015 to take advantage of the tax deductions it could make at the time. In that year and in 2016, executives got either their full target bonus or slightly less. The data for 2017 isn't yet available.

Next year, Chief Content Officer Ted Sarandos will get a salary of US$12m (NZ$17m), more than his salary and cash bonus target combined for 2017. Greg Peters, who was promoted this year to chief product officer, will get US$6m (NZ$8.4m) in salary, also bigger than his combined total for 2017.

Netflix's management team is still getting most of its pay through stock-based incentive compensation. Chief executive officer Reed Hastings, chief financial officer David Wells and Sarandos will each get an average increase of about 31 per cent in the value of their option grants for 2018, while Peters's will more than double. There's a trade-off for Hastings, whose salary will fall to US$700,000 from US$850,000.

Netflix shares have gained 56 percent this year. Press representatives for the company didn't immediately respond to requests for comment.

Other companies including Goldman Sachs and Jefferies Group have also made compensation changes because of the new tax plan. Goldman accelerated the payment of stock awards that were due to be paid next month, which a person briefed on the move said will save the firm about US$100m and slightly benefit the individuals collectively.

Jefferies gave employees the option to get their bonus checks in either December or January as some bankers and traders may find it more advantageous to have a bigger income in 2017 with existing deductions in place, while others may benefit from next year's lower tax rates.