Employees are sometimes approached with contracts that provide them with specific benefits for certain actions. One of these is a retention bonus agreement, which is a contract that offers an employee extra compensation for remaining with the employer through a specific time period or event.
It’s common for a retention bonus agreement to be presented as part of a merger, acquisition, leadership changes or major projects. Some employers recognize the value of having trusted and key employees in place throughout these types of turbulent situations.
Terms must be outlined clearly
An employee who’s presented with a retention bonus agreement may focus heavily on the amount of the bonus, but that’s not the only thing they should review. They should also look at the specific terms that are tied to the bonus. These should be as clear as possible so there’s no ambiguity about what’s required for the employee to receive the bonus.
The agreement should outline the amount of the bonus, the retention dates, and the bonus payment date. Some contracts may have installments of the bonus as specific milestones, but others offer a lump sum at the end of the retention period.
Another important clause has to do with ending employment. The agreement should clearly spell out what happens if the employee voluntarily quits or is terminated. How terminations without cause and with cause are handled should each be outlined.
These agreements can be complex, so it’s often best for employees to have someone help them to review the terms. They should not sign the agreement until they’re completely certain they understand the exact terms included.