Total Target Cash represents the complete value of all cash compensation an employee receives when they achieve expected performance results. It comprises two primary components:

1. Annual Base Salary: The fixed portion of an employee’s compensation.
2. Target Performance-Based Bonus: The variable pay an employee receives upon meeting their performance targets.

TTC is commonly employed in sales and executive compensation. It provides a clear picture of an executive’s potential earnings over their tenure with the company.

Calculating Total Target Cash

The formula for calculating TTC is straightforward:

TTC = Base Salary + Target Bonus and/or Commission

Here’s the breakdown:

• Base Salary: The annual fixed pay.
• Target Bonus and/or Commission: The variable component an employee receives upon achieving 100% of their performance targets.

Total Target Cash vs. Total Target Compensation

While both terms sound similar, they have distinct differences:

1. Total Target Cash (TTC):
   • Includes base salary and target bonus/commission.
   • Excludes long-term incentives like stock options.
   • Represents a conservative calculation without considering stock price fluctuations.
2. Total Target Compensation (TTC):
   • Includes base salary, bonus, equity, and other monetary forms.
   • Encompasses long-term incentives.
   • Takes historical data into account to estimate future compensation.

Why Total Target Cash Matters

1. Transparency: Employees comprehend their potential earnings.
2. Motivation: Clear targets encourage optimal performance.
3. Retention: Competitive TTC retains top talent.
4. Alignment: Aligns employee efforts with organizational goals.