Question: I’ve got two questions about “Retention Bonuses.” First, is it proper to ask for a “Retention Bonus?” Second, how would you structure the letter?

Magnolia, TX

Answer: Before answering your questions, first, let me define a “retention bonus” for you; “Payment of an agreed sum of money to an employee in exchange for his or her promise to remain an employee until a certain date.”

As to your two questions:

1. Whether it is “proper” to ask for a “Retention Bonus” depends entirely on why the subject has come up.

For example, if your company is going to outsource all its jobs to China, and wants you to stay on board to make all the necessary arrangements, and be, in effect, “the person who shuts the lights off,” then a retention bonus is appropriate. As another example, if you work for an insurance company, and it merges with another insurance company, and your employer asks you to stay around until they decide if they want to let you go, then a retention bonus is appropriate.

On the other hand, if a large business deal you are handling is scheduled to close in a month, and you are critical for its successful completion, it is not proper to say, “Give me a retention bonus now, or I will leave tomorrow, and you will lose the deal.” Also, it is not proper to demand a retention bonus in exchange for not “going public” with damaging information about your employer. In fact, that is a criminal act, called “extortion,” and could even place you in jail for, say, ten years.

2. How would I structure such a letter? Generally, this way:

A. I have been asked for an assurance that I will remain an employee until a certain date, or a certain event.
B. [Alternatively, it seems like it would be in the company’s best interest that I remain until a certain date, or certain event.]
C. However, if I remain until that date, or that event, I may suffer some adverse consequence by doing so, such as losing my job.
D. It seems to me that it would be in both of our interests to consider a “retention bonus.”
E. I would be willing to remain under these circumstances in exchange for a payment of X dollars, which should fully address the adverse consequences I may suffer and the benefit to the company.
F. Can we agree that, in exchange for my promise of remaining to a certain date, or to a certain event, and if I do so (even if that event does not take place), or if you end my employment before that date or event without my committing serious “cause” to be fired, the company will pay me, no later than [Month, day, year] the agreed sum.
G. If the company agrees, would you please send me a written note or email to that effect, so that we are certain, clear and committed, mutually.

Thank you.

Miguel, you might want to review a Newsletter I wrote in 2005 entitled “How to Negotiate Retention Agreements.” You can read it by [clicking here]. 

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Best, Al Sklover

© 2009 Alan L. Sklover. Commercial uses prohibited. All rights reserved and strictly enforced.