LTIPs vs MIPs: Which incentive model works for your business?

Posted Friday 11th July 2025

As your business scales, attracting and retaining the right leadership becomes critical. One of the most effective tools at your disposal is equity-based incentive planning. Two models dominate the space: Long-Term Incentive Plans (LTIPs) and Management Incentive Plans (MIPs).

While both aim to align leadership performance with business success, they serve different purposes depending on your ownership model, growth ambitions, and end goals.

LTIPs: Incentives for public companies

LTIPs are typically used by listed companies. Their main goal is to reward sustained performance and drive long-term shareholder value. These plans usually involve shares or options that vest over time, based on set performance targets.

Key features:

Rewards: Conditional rights to shares or cash.
Vesting: Typically over 3–5 years, often with an extra holding period.
Performance metrics: Linked to KPIs such as Total Shareholder Return, Earnings Per Share or Return on Capital Employed (i.e. typical public company performance measures).
Governance: Includes clawbacks, malus provisions, and post-vesting holding rules – all intended to allow for recourse if things subsequently go wrong.

LTIPs provide structure, predictability, and clear alignment with shareholder expectations making them ideal for regulated, transparent environments like public markets.

MIPs: Incentives for private equity-backed companies

MIPs are designed for businesses backed by private equity. These plans are focused on value creation over the life of the investment – i.e. they are focussed on a prospective ‘exit’ and therefore often pay out only when the business is sold, refinanced, or listed.

Key features:

Equity-based: Typically growth shares, options, or “sweet equity” linked to value uplift.
Exit-driven: Rewards are unlocked only at sale, IPO, or refinancing.
Waterfall structure: often structured so that investors are paid first, then management shares in remaining gains.
Co-investment: Senior leaders often invest their own capital, sometimes with loan support.
Custom design: Flexible metrics tailored to the deal and investor priorities.

MIPs are high-reward, high-risk models that tightly link executive outcomes to investor success.

LTIPs vs MIPs: A side-by-side look

Category	LTIPs	MIPs
Best for	Public companies	Private equity-backed firms
Trigger	Time + performance vesting	Exit event (sale, IPO, recapitalisation)
Structure	Standardised and regulated	Fully bespoke and deal-specific
Flexibility	Limited by public market norms	High; tailored to investor goals
Tax benefits	May qualify for EMI	Can access CGT treatment with correct setup
Complexity	Straightforward to administer	Requires legal, tax, and valuation expertise
Potential upside	Moderate, long-term	High, exit-linked payoff

Which model is right for you?

If you’re a public company, LTIPs make sense as they’re structured, compliant, and well understood by the market.
If you’re private equity-backed, MIPs are built for your world as they are tailored, high-stake, and focused on exit value.
If you’re a startup or SME, you may benefit from Enterprise Management Incentives (EMI) or a hybrid approach that blends LTIP stability with MIP-style upside.

Conclusion

LTIPs and MIPs aren’t one-size-fits-all, but neither can one be said to be better than the other: they’re designed for different business models and different stages of growth.

LTIPs are measured, reliable, and built for continuity.
MIPs are dynamic, ambitious, and laser-focused on growth and value creation.

The best plan is the one that fits your strategy and your future and – most importantly – is tailored to fit your business.

Please contact Matthew Overton or Rajiv Samani to schedule a free consultation.

This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.