Executive Coaching Articles

Employee Retention Bonus

Businesses hand out retention bonuses to key employees at different times and for different reasons.

  1. Mergers, Takeovers, or Hostile Takeovers.

Merging companies face having two employees for every one job. Who will stay and who will go? The company would like to decide, but smart employees see the handwriting on the wall and go off looking for a new job on their own.

This puts the company at risk that BOTH employees will leave and the gap in management will be detrimental to the company. So they offer retention bonuses.

In this case the bonus serves these purposes:

  • It’s a strategy to motivate the worker to stay with the company
  • It’s a one-time deal.
  • It’s a show of appreciation for the employee’s talents and experience.
  • Often there is no written contract and no obligation that forces the employee to remain. Sometimes there is a contract that requires the employee to stay for a certain period. It may also have additional perks if the worker is then terminated.
  • It may not obligate the employer to keep the person given the bonus on for any length of time.

The rationale behind the offer is the management’s understanding that the employee is taking a risk. Chances are their job will disappear. It’s in the employee’s best interest to go searching for another job. In effect, the retention bonus pays the employee for that “risk” of staying.

  1. Major Campaign or Deal

A company may be going through an expansion or have a major undertaking scheduled. It needs to feel confident that its key employees will be there so the business can fulfill its contractual obligations.

Especially if it feels that some of the leaders may be looking to move on, the company may offer bonuses to retain their valued employees.

  1. Annual Company Retention Bonus

These bonuses are more formal and structured. They may be based on company profits. Likely they are written into company policy.

They may be given out only to employees who have been with the company for a certain length of time. The employees may have to achieve certain milestones such as:

  • Satisfactory performance evaluations
  • Absenteeism criteria
  • No written warnings
  • Weekly productivity quotas.

This kind of employee bonus may be of a standard nature. If you are eligible, you’ll be given the same amount of money as other people in your category. As with all bonuses- this is taxable income.

Should You Ask for a Retention Bonus?

Companies want to keep key employees. So first assess your perceived value to the firm. What would be the financial effects of losing you? Recognize that mergers and major company campaigns may make you more valuable at that time.

Second, evaluate your need for job security. If you indicate you might move on… how likely is it they’ll say,”Good bye, good luck!” to you? How much do you need this job?

While the company is not likely to care much about what YOU need, want and deserve, they do care about that THEY want, need, and deserve.

Fair negotiations have give and take. Each side must get what they want or need. Your goal is to help the company see that paying you a bonus will give them a fair exchange for a steady, valuable worker who will increase company productivity in critical areas.

Be respectful, reasonable, and rational. Putting your request in writing can help you choose your words carefully to avoid sounding like a threat: “If you don’t pay me, I’ll leave you in the lurch.”

At the same time you can acknowledge mutual concerns and benefits. Reassure the company of your steady desire to be a valued employee. Be open, flexible, and available to discuss.

And you may persuade them to give you an employee retention bonus.