Payback of Retention Bonuses

If you are offered a signing bonus, you should be aware that it likely comes with the requirement that you pay it back if you leave the company within a specified amount of time. When you are first starting a job, agreeing to stay for two or so years probably doesn’t seem like a big deal, but it can be if you are miserable after only working there for six months.

A signing bonus is offered by prospective employers as an incentive for the new employee to join the company. It is typically offered when the employee possesses certain skills or knowledge that the company needs. The company views the signing bonus as a bargain because the employee agrees to remain working for the company for the period specified, which provides stability for the company.

Most signing bonuses come with conditions attached. The most common is a repayment agreement stating that the employee will repay the bonus if the working relationship is severed prior to a certain date or time period. Most courts consider the signing bonus in exchange for the repayment agreement to be a valid contract. Thus, an employee who accepts a signing bonus and agrees to the terms of the repayment agreement, will be held liable for repayment of the bonus money if he/she violates the terms of the agreement. In contrast, if the employee accepted the bonus money but did not sign a repayment agreement, the employee is not liable to repay the money.

What if you do not want to agree to stay with the company for the specified period? The simplest option is to not accept the signing bonus if there are contingencies attached to it. Remember, the signing bonus is only a one-time payment, so you may be able to negotiate an increase in salary after one year of employment that would be significantly more than the bonus amount. Another option would be to negotiate a staggered payment of the signing bonus. For example, you could receive half of the bonus payment when you start your employment, with the other half to be paid after six months or a year of employment. This allows you to determine whether you want to stay with the company without being liable to repay the full amount if you want to part ways earlier than you originally agreed. Finally, you could accept the bonus payment, set it aside and not spend any of it until you are positive you will stay with the company for the contracted amount of time.

These are only a few of the options available to you. If both parties agree, a contract can be changed or even cancelled. If you are trying to decide whether you should accept a signing bonus or how to negotiate after one has been accepted, we can help.

When it comes to retention agreements, negotiation is crucial. If you are an executive 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.