Labor & Employment Law

Do Retention Bonuses Really Work?

By Michael Fitzgibbon

This is the subject of a timely post over at Pennsylvania Employment Law Blog.

Retention bonuses are often the "weapon" of choice In corporate acquisitions where their purpose is to ensure that those identified key people, usually, though not always, senior management, are around through some prescribed "period of transition".  There are other financial means of ensuring that senior management are focused on the task at hand and not on the personal issues associated with a period of change (i.e. "am I going to be looked after if the purchaser doesn't take me on on terms that I'm happy with").

In a business closure situation, where the decision is announcement in advance and employees are provided with working notice to wind down the business, retention bonuses can be used to ensure that those identified employees are there to "turn off the lights", as it were. 

Of course, in either case, the retention bonus must be sufficiently attractive and lucrative to ensure that people will remain. 

If the intention is to "retain" then, lets be honest, what you're doing is trying to buy people's attention and the only question is "how much will it cost" to do that.  If the intention is to "motivate" people, I'm not sure that a retention bonus is the answer.  In that regard, see the article Do Retention Bonuses Work?.

Full post as published by Thoughts from a Management Lawyer on February 07, 2008 (boomark / email).