A company may offer you a retention bonus to keep you, and the amount depends on your salary and that business. If you receive one, consider whether you want to stay with the company for the amount of time in the issued agreement, determine whether you want to explore other opportunities, and negotiate before you accept the bonus.
By Brandi Fowler
A retention bonus is a payment given to an employee as an incentive for them to stay at a company.
The amount is in addition to their regular salary, and can be “anywhere from 10-25% of an employee's base pay,” said Business & Career Coach for WOC + Allies Elaine Lou Cartas.
The terms of retention bonuses vary, but usually, employees commit to stay with the company and not seek employment elsewhere for a certain amount of time after receiving it, said Workweek Chief People Officer and “I Hate It Here” newsletter founder Hebba Youssef.
Companies are offering these bonuses to employees because it’s becoming harder to retain top talent post-pandemic, said executive career coach and people and cultural leader Candice Enriquez.
“Companies are very fearful of losing talent, especially if it's somebody in the middle of completing a project or a merger and acquisition,” Enriquez said. “Mergers and acquisition is what it typically was before, but now it's [increasing] because companies are having a hard time keeping the talent due to the gig economy.”
Businesses also issue retention bonuses when there are major changes within a company or they have a challenging project that requires key positions.
The “Great Reshuffle” also fueled retention bonuses, Youssef said.
“Your talent is an investment, and if your investment is walking away, the company ultimately loses somebody with subject matter expertise, someone they've developed and devoted time and money to,” Youseff said. “So a lot of times, it's so that they can retain those folks and maximize their investment, as well.”
Whether You Should Accept a Retention Bonus
Consider a few things before you accept a retention bonus.
First, determine whether you plan to stay at the company that offered you the bonus, Enriquez said. “It also has to do with what you are working on,” Enriquez said. “A retention bonus is meant to keep you working on [your] project for a designated amount of time. So if you are comfortable with [your project duties], a hundred percent [take] it.
“But if you are someone who thinks ‘I actually might want to leave in two to three months, and this [contract] says I need to stay for six months,’ that can be the deciding factor.”
Cartas said you should also consider whether you are already receiving a competitive salary and benefits you are satisfied with, and what the bonus terms are.
“For example, maybe an important value for you is career growth, and you would like to know if you would be able to get a promotion,” Cartas said. “Would you be considered for one according to the terms or would you have to be in the same job roles and responsibilities according to the terms?”
Ask those questions before you accept it.
Taking a retention bonus can also be beneficial during economic downturns or recessions. If a company conducted a layoff or “business-altering situation,” they probably wouldn’t have to commit to employing you, but that can be determined in the terms the company lays out, Cartas said.
It is also crucial to ask the company why they are offering the bonus so you can factor that into your decision of continuing to work for the company, Cartas said.
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“If the reason is high turn-over and they want to keep clients, that might be a red flag. The company might have bigger issues, so you may want to reconsider. If the company's retention bonus reason is because of a critical project or they acknowledge your value, then you may want to stay.”
Some companies issue retention bonuses after a wave of employees has left, Youseff said.
“If people are leaving a company, there might be a reason behind it,” Youssef said. “What that reason is depends on who you talk to and what experience they are having at the company. But if I were offered a retention bonus, my thought would be, ‘Who has left recently and what has their experience been? Is this somewhere that is trying to stop me from leaving? Because I might be having a similar experience as those people.’”
The Pros and Cons of Retention Bonuses
The biggest pros of retention bonuses are the extra money and guarantee of employment.
“A lot of times, especially in the current economy with the [possible] recession, guaranteeing your job almost alleviates the stress you have,” Youseff said. “Most of us are at-will employees, which means that a [company] could fire us at any time, and it's fine. So, when the economy is potentially not going to be in a good spot, security is important to a lot of people.”
As for cons, it removes the ability to take on a more desirable opportunity if it comes along during the terms of the agreement, Youssef said.
“You're locked in so it becomes really hard for you to explore other opportunities and you never know when the opportunity is going to come your way,” Youssef said. “So I think that can be really difficult for folks who always want to have power over how they exit, being locked in somewhere can be stifling.”
You shouldn’t view it as an opportunity to take the money and run.
“Legally it's hard to uphold,” Enriquez said. “By taking the retention bonus, they're agreeing to the terms of the retention bonus. Theoretically, they've been paid and could leave immediately, but that would be very just bad to break their agreement and [bad for] their reputation.”
Negotiate Your Retention Bonuses
Your retention bonus is negotiable, so negotiate it, Enriquez and Youssef said.
“You can negotiate anything, so negotiate it based on what [you] want,” Enriquez said. “For example, [a negotiation could be] if they complete the project earlier than the deadline, then they are released before the retention period.”
The company sees you as valuable and worth their time if they ask you to stay and offer you that bonus, so approach the conversation in that way, Youssef said.
“You have leverage when you ask for things,” Youssef said. “You don't necessarily need to negotiate for more money. You can negotiate for a hybrid working situation or a four-day work week or more PTO. So, it's not always money. If they can't give on the money, you could probably negotiate for other things as well.”
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What to Know About Retention Bonuses
