Organizations keep coming up with different incentives for their employees. Retention bonuses fall under this category and are common in organizations undergoing employee shuffles.

To know more about retention bonuses and how to negotiate for one, check out this article.

What Is A Retention Bonus, And How Does It Work?

Companies use bonuses as a way to keep their employees from leaving. A retention bonus is a one-time payment made by a company to motivate its employees to remain within the organization. Companies generally give retention bonuses to their employees during critical times like mergers or acquisitions. 

The company drafts a contract stating the period of retaining the employee in exchange for a lump sum amount. Retention bonuses usually range within 10-25% of an employee’s base salary and depend on how long the employee agrees to remain within the company. The retention period is usually fixed and not indefinite.

How Do Companies Benefit From Retention Bonuses?

#1 Employee productivity

The possibility of a bonus will definitely boost employee productivity and ultimately prove beneficial to the company. 

#2 Employee loyalty

If an employee has signed a contract to stay in the company in exchange for a bonus, it’s less likely that they’ll leave the company before the end of the contract period. This ensures the employee’s loyalty to the company. 

#3 Team consistency 

Having a consistent team of employees can help retain the support of external stakeholders like investors. Keeping the senior-level and executive employees within the company can prove valuable to investors.

How To Negotiate?

Here are some things to keep in mind while negotiating your retention bonus.

#1 Review your contract carefully 

Make sure that you go through all the terms of the contract carefully. It is better to read the terms and conditions when you’re relaxed and cool-headed. Pay close attention to the language used, as each word in a contract holds value.

#2 Consider declining

It is advised not to stay within a company for monetary purposes only. Try making a list of pros and cons of accepting and rejecting the retention bonus. If you were already planning to leave the company as it might not be the right fit for you, monetary incentives might not be the solution.

#3 Think about asking for a raise instead

Based on the amount of bonus offered and your pay scale, contemplate whether a salary hike could be a better option. 

#4 Request for a meeting 

It is always better to discuss things like retention bonuses in person rather than over email. This gives you more space to negotiate as well. Be clear and specific about changes you wish to make to the contract.

Conclusion

Retention bonuses can be of great use to companies when they wish to retain a valuable employee. As far as the employee is concerned, it offers a negotiable space to get a better salary or find a place that offers them one. Either way, both parties must remain patient while implementing retention bonuses.