Changing jobs every few years is not frowned upon like it used to be. As a result, businesses are finding ways to incentivize their key employees to stay with their company. One of the most effective methods is to offer top performers a retention bonus.
A retention is simply a payment made to the employee in exchange for the employee’s agreement to remain with the company for a specified period. A retention bonus is often less costly to the company over time than giving the employee a raise. As an employee, however, you should closely examine the retention agreement before accepting the bonus.
It is important to understand that you are being offered a retention bonus because the company recognizes your value to their success. By keeping you employed, the company saves on recruitment and training expenses that would be incurred to replace you. If your company is merging or being restructured, your continued employment is likely essential to the success of the deal or transition. Of course, a retention bonus may also be in response to you giving notice that you are leaving the company.
When you are provided a copy of the retention contract, you should contact an experienced attorney to review it with you. This type of contract will impact your financial future, so it is imperative that you fully understand what you are agreeing to in exchange for the money. You must also consider the tax implications of receiving the bonus. Your retention payment will typically be taxed as income, so you should consider the amount you will receive after taxes to make sure it is worth it to stay employed with the company.
Even though the company typically sets forth the retention offer, it is perfectly acceptable for you to negotiate the terms. You may want to ask for a shorter retention period or more money. Your attorney can help you decide what terms should be negotiated and how to approach your employer with your requests.
When it comes to retention agreements, negotiation is crucial. Whether you are an executive or an employer considering a retention compensation package, let our knowledgeable and experienced attorneys assist you in negotiating the best possible terms for you. Contact our office today to schedule a consultation.