Published on January 6th, 2015 by Alan L. Sklover
“All I’ve ever wanted is an honest week’s pay for an honest day’s work.”
– Steve Martin
ACTUAL “CASE HISTORIES”: Jana contacted our office with an almost whimsical question: “I was just offered a bonus to stay in my job. What’s next . . . offer to pay me to keep breathing?” She honestly did not understand why her employer would pay her to stay in her job for six months, and was quizzical – and even a bit paranoid – at the same time.
In her consultation with us, we explained to Jana the two reasons why employers offer Retention Bonuses: to encourage employees to stay in their jobs either (1) during a period of heightened job insecurity, such as an upcoming merger, which makes people concerned about losing their jobs, or (2) to ensure that an important event or transaction goes smoothly, such as the closing of a large business deal or a major corporate celebration, when the employee is critical to company success. In both circumstances, the employer sees it as worth paying the employees an extra sum.
We also explained to Jana that, by its very nature, an offer of a Retention Bonus means that the employees receiving the offer are viewed as particularly valuable, and in our world that means that they might have leverage to negotiate better “rewards,” that is, higher payment, or lower “risk,” that is, less chance of not getting paid the bonus. With a little coaching, and a dose of induced courage, Jana did request both better “reward” and lower “risk” and to her surprise was successful in both requests.
Though Jana did get the Retention Bonus, her job was eventually eliminated after her employer merged with another company.
Sure was handy that Jana requested enhanced severance in exchange for agreeing to the Retention Bonus. She was the only one in her department who received extra severance. And for only one reason: she was the only one to ask for it.
LESSON TO LEARN: A Retention Bonus is exactly what its name implies: a bonus to stay in your job. For example, “We offer you (a) $25,000 (b) if you stay in your job until June 1st of this year.” By its very name and nature, such an offer says, “You are valuable to us, at least for a certain period of time.” If your employer offers you a Retention Bonus, chances are your continued presence is perceived by your employer as being significant valuable to it
Why do employers offer Retention Bonuses?: (a) to keep you on board after a merger until they decide which of the two Directors of Logistics will be kept on after the merger; (b) to keep you on board until they decide if they need you for the longer term, (c) to gain from you the critical knowledge or insight that only you have, (d) to ensure that there is a smooth transition of client relationships if and when there is a change in corporate structure or personnel, among many other possible reasons.
“Being perceived as valuable” is, in our minds, the precise definition of “having leverage” to negotiation for better terms. And for this reason, we almost always suggest that (a) Retention Bonus offers be read very well to locate hidden “trap doors” in the legal language, and (b) Retention Bonus offers be negotiated with an aim to both (i) increase what you are being offered, and (ii) decrease the chances that you will miss out on the bonus due to possibly “tricky,” unclear or evasive language.
WHAT YOU CAN DO: Here are ten steps you would be “work-wise” to take if you are offered a Retention Bonus:
1. Watch out for the “actively employed” condition. Quite commonly a Retention Bonus agreement or plan says something like this: “You will receive the money only “if you are actively employed” on a certain date. What happens if you are “out sick?” What happens if you have been terminated without cause? Consider requesting something like “You will receive the money if you do not resign before a certain date.” See the difference? The first is unclear; the second is both clear and in your control.
2. Watch out for the “sole discretion” trap. Retention Bonus agreements and plans also commonly say something like “You will receive the money only if you perform your job in satisfactory fashion ‘in the sole discretion’ of the Company.” “Sole discretion” is a very risky term because it means “Our decision is not subject to discussion or review . . . by anyone.” Might as well say “if we feel like it.” Consider requesting “reasonable discretion” or “as well as you have performed during the last 12 months.”
3. Try to carve out “Conditions I cannot Control.” Retention Bonus agreements and plans sometimes contain conditions that employees cannot control, but could deny them the Retention Bonus. For example, you might be paid your retention bonus “six months after the closing of the merger.” That’s just dandy, but what if – due to no fault of your own – the closing of the merger does not take place? That is just one of innumerable “conditions I cannot control” that you might want to “carve out” of your Retention Bonus Agreement.
4. Ask that “Cause” requires detailed description and cure opportunity. Being terminated for alleged “cause” is very detrimental to a career, and often results in considerable financial loss. That is the case here, too, as you would lose any earned Retention Bonus if you were to be terminated for “cause.” So, request that, if you are alleged to have committed “cause” to be fired, you be provided (i) a detailed description of what it is you allegedly did wrong, and (ii) a 10-day period to explain, rebut or correct the problem, if it is capable of correction.
5. Don’t be afraid to ask for a larger Retention Bonus. I am a big believer in the notion that any request made – so long as it is (a) made respectfully, (b) is a reasonable request, and (c) is presented along with a sensible rationale, has little if any downside risk. In almost all cases, the worst that happens is a simple “Sorry, we can’t do that.” Life is full of risks, and often the greatest risk is in missing out on available opportunities.
I suggest all employees who have received Retention Bonus offers consider asking for a larger sum. The best rationale is that “I am frequently approached by recruiters and headhunters. To keep myself out of contention for great jobs when I know I could lose my present job seems a larger risk than the bonus covers.” Give it some thought.
6. In turn, will your employer commit to keeping you employed throughout the Retention Period? As the saying goes, “Turnabout is fair play.” Most Retention Bonus offers say, “If you stay until X date, we will pay you Y dollars.” It is sometimes expressed, but more usually implied, that “We, your employer, have the right to let you go before the Retention Period is over, and if we do, we promise to pay you the Retention Bonus.” There is nothing whatsoever wrong with asking for a return commitment, that is, that as part of the bargain, your employer promises not to terminate you (unless you have engaged in bad conduct) until the end of the Retention Period. Any extra measure of job security never hurts.
7. You might request (a) advance notice, and (b) severance, if terminated soon after. Why does an employer offer an employee a Retention Bonus? Most commonly it is because there are good reasons for that employee to feel “job-insecure.” For this reason, a fair and reasonable request is that, at least for six or twelve months, any termination without “cause” will require both (a) a prior notice to provide you an opportunity to conduct a job search, and (b) payment of reasonable severance.
8. If compensation, duties or benefits are materially reduced, you should have the right to leave and keep the Retention Bonus, too. Think about it: a Retention Bonus offer says, “Stay for X period of time, and we will pay you Y dollars.” Okay, but what if, in the meantime, your salary of $100,000 is reduced to $20,000; do you have to stay to get the $10,000 Retention Bonus?” The same goes if you are demoted, or have your benefits terminated.
So, consider asking that, in these circumstances, if you depart after giving 30 days notice, you still receive the Retention Bonus. Alternatively, you might ask that your employer agree that, during the Retention Period, they will not materially change your salary, benefits or duties.
9. If the “must-stay-until-date” is an event, or not entirely specified, ask for an “outside date.” Sometimes the “must-stay-date” is an event, as examples, “the date of the Closing of the Merger,” or “when the Board votes to accept the annual audit report, which is usually by February 15th of each year.” Both of those two examples might never happen, or might happen very much later than anyone anticipated. If your “must-stay-date” is such an event or not entirely specified, ask for the addition of “but in all events and circumstances, no later than September 15, 2018.”
10. Don’t be afraid to further customize the terms of your Retention Bonus. Last, but not least, do not be afraid to ask your employer to address, in the Retention Agreement you have to sign, other issues, concerns and particular issues in your workplace, industry or life. The list above is of the most common issues to address. Your life just might not be entirely “common.”
We offer a Model Memo entitled “Memo Requesting Changes to Retention Bonus Agreement” to respond to a Retention Bonus offer from your employer. With 8 of the most common requests for improvements for you. What to Say, and How to Say It™, just [click here.] Delivered by Email – Instantly!
By consciously, mindfully and thoughtfully dealing with the trials and tribulations of the experience and relation we call “employment” you are doing all that you can do to ensure a successful outcome, to everyone’s betterment. Job Security and Career Success – those are the goals we always strive for, and those are the goals that best serves us all. Welcome to SkloverWorkingWisdom.™
P.S.: One of our most popular “Ultimate Packages” of forms, letters and checklists is entitled “Ultimate New Job Package” consisting of 10 items, including Resume Cover Letter, Thank You After Interview, Memo Confirming Terms Offered, Response to Offer Letter, our Master Checklist of Items to Negotiate, and 50 Good Reasons to Explain Your Departure from Your Last Job. To obtain a complete set, just [click here.] Delivered by Email – Instantly!
SkloverWorkingWisdom™ emphasizes smart negotiating – and navigating – for yourself at work. Negotiation and navigation of work and career issues requires that you think “out of the box,” and build value and avoid risks at every point in your career. We strive to help you understand what is commonly before you – traps and pitfalls, included – and to avoid the bumps in the road. Knowing “What to Say and How to Say It”™ in response to an offer of a Retention Bonus is a crucial part of that “navigating,” and an important part of that knowledge and understanding you need.
Always be proactive. Always be creative. Always be persistent. Always be vigilant. And always do what you can to achieve for yourself, your family, and your career. Take all available steps to increase and secure employment “rewards” and eliminate or reduce employment “risks.” That’s what SkloverWorkingWisdom™ is all about.
*A note about our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.
Please Note: This Email Newsletter is not legal advice, but only an effort to provide generalized information about important topics related to employment and the law. Legal advice can only be rendered after formal retention of counsel, and must take into account the facts and circumstances of a particular case. Those in need of legal advice, counsel or representation should retain competent legal counsel licensed to practice law in their locale.
Sklover Working Wisdom™ is a trademarked newsletter publication of Alan L. Sklover, of Sklover & Company, LLC, a law firm dedicated to the counsel and representation of employees in matters of their employment, compensation and severance. Nothing expressed in this material constitutes legal advice. Please note that Mr. Sklover is admitted to practice in the state of New York, only. When assisting clients in other jurisdictions, he retains the assistance of local counsel and/or obtains permission of local Courts to appear. Copying, use and/or reproduction of this material in any form or media without prior written permission is strictly prohibited. All rights reserved. For further information, contact Sklover & Company, LLC, 45 Rockefeller Plaza, Suite 2000, New York, New York 10111 (212) 757-5000.
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