You’re a valuable employee, with a skill set that doesn’t come easily – so your employer wants to keep you on their team. As an incentive, they’ve offered you a retention agreement.
A retention agreement is a legally binding contract that limits your ability to act like an “at-will” employment. Once you agree on the terms, you and your employer are both bound by the agreement about any conditions related to your employment. Reviewing a proffered retention agreement for fairness is critical if you want to make sure that the terms are transparent, fair and beneficial for you.
What are the key elements that you need to understand?
Naturally, you want to know what you can get from the agreement. Retention agreements usually offer incentives like bonuses, salary increases, stock options and more – by you want o make sure that your incentives are clearly defined, including payment schedules. You can compare these with industry standards (if known) and see if they are competitive.
The length of the retention period is also critical. Many times, retention agreements are offered when the company is going through a transition phase, a merger or there’s been recent attempts to “poach” key employees. You want to make sure that the retention period aligns with your personal goals and is reasonable for the incentives being offered.
You also need to know if there are any conditions place on payment. If your bonus is tied to unrealistic or subjective performance metrics, you may not be getting much of a bonus at all. You also need to be wary of clauses that tie your bonus to specific events, like the completion of a merger or project. Make sure you are protected if the merger falls through or the project is canceled by the client or company.
FInally, make sure you understand any voluntary and involuntary termination clauses that specify when the retention agreement cn be ended by either side – and what happens to your retention bonus either way.
Reviewing a retention agreement for fairness involves a lot of careful consideration. Legal guidance can make it easier to make sure that you’re not getting the bad end of a deal.