Once you find the talent you need for your business, you need to keep it – and one effective strategy to ensure that your organization doesn’t lose its most valuable players is through the use of employee retention agreements.
An employee retention agreement, which is also called a retention bonus agreement, is a type of contract between an employer and their employee. This agreement is designed to encourage key employees to stay with the company for a set period by offering them some kind of significant financial incentive beyond their normal compensation as a one-time payment.
When should a company consider one?
There are all kinds of reasons that companies use retention bonuses, but they’re most commonly used when the job market is pretty healthy for whatever industry you’re in. Retention agreements can help you avoid losing important players:
- To a competitor who has offered them another position with additional compensation or benefits that are attractive and you can’t beat the offer
- When the company is undergoing significant changes and you’re worried that the appearance of instability in your upper ranks could hurt your future prospects
- When there’s a merger or acquisition happening and you’re concerned that some of your best employees will bolt under the strain
- When there’s a specific project you need to have completed and you want to make sure that your talent doesn’t disappear on you before it is done
Retention bonus agreements should be tailored to the unique needs and circumstances of each employee and the company. A one-size-fits-all approach is never a good idea, which is why it can help to get experienced legal guidance as you draft an offer to one of your key employees.