When is it proper to ask for a “Retention Bonus?”

Miguel
Magnolia, TX

Answer: Lots of misinformation and confusion persists about retention bonuses. Here’s what you need to know:

1. What a retention bonus is. First, let me offer you a common-sense definition of a “retention bonus”: “Payment of an agreed sum of money (or other thing of value) to an employee in exchange for his or her promise to remain an employee until a certain date.” I hope

2 Retention Bonuses are most commonly a “bridge over risk.” The real purpose of a retention bonus is to pay the employee for accepting a known risk, most commonly loss of his or her job during a merger of companies, or continuing to remain an employee of a company that is under criminal investigation, and hence continued employment with the firm gives rise to a continued reputational risk to the employee. In any of those situations, seeking a retention bonus is entirely proper, if you ask me.

3. Whether it is “proper” to ask for a “Retention Bonus.” 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 asking for a retention bonus would seem to me to be entirely 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.

If you are not comfortable with writing, or do not feel you know “What to Say, or How to Say it,™” we offer a Model Memo entitled “Model Memo Proposing a Retention Bonus or Arrangement,” to send to your Manager when you face a risk to remain on board, and your Manager faces a risk if you leave. To obtain a copy, just [click here.] Delivered by Email – Instantly!

4. When it is not “proper: to ask for a “Retention Bonus.” 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, I don’t think 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.

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].

Hope this is helpful. Please tell others of our blog.

Best, Al Sklover

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.] “What to Say, and How to Say It.”™ Delivered by Email – Instantly.

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