Retention bonus
A retention bonus is extra pay an employer promises an employee for staying until a set date or through an event, such as a merger, a restructuring or a big project. It is paid only at the end of the retention period, usually as a lump sum, and the employee loses it if they resign early.
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Sample Retention bonus clauses
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CHICO'S FAS, INC.Payment of the Retention Bonus. Subject to the terms and conditions set forth herein, you will be eligible to receive a retention bonus in the aggregate amount of $[***] (the “Retention Bonus”), which will vest on the date that is three months following the Closing Date (the “Vesting Date”), subject to the accelerated vesting terms set forth in Section 2, below. Payment of the Retention Bonus is subject to (a) your timely execution, delivery and non-revocation of a release of claims in favor of Buyer, the Company and their affiliates, substantially in the form of the release attached hereto as Appendix A (the “Release”) and (b) your continuous employment with the Company or its affiliates through the Vesting Date, except as provided below. The Retention Bonus will be payable in a lump sum on the Company’s first ordinary payroll date following the date on which the Release becomes effective and non-revocable (and in any event no later than March 15 of the year following the year in which the Vesting Date occurs). For the avoidance of doubt, the payment of the Retention Bonus will be in addition to, and not in lieu of, any severance or other benefits you may be entitled to pursuant to any other plan, program or agreement.
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CHICO'S FAS, INC.Unfunded Arrangement; Special Incentive. The Retention Bonus hereunder shall not be deemed to create a trust or other funded arrangement. Your rights with respect to the Retention Bonus shall be those of a general unsecured creditor of the Company, and under no circumstances shall you have any other interest in any assets of the Company by virtue of the award of the Retention Bonus. The Retention Bonus will not be treated as salary or taken into account for purposes of determining any other compensation or benefits that may be provided to you.
1.Retention Bonus. In an effort to retain Employee and in light of Employee’s critical role in the business, the Company is offering Employee the opportunity to earn a total retention bonus in an amount up to $_______ (“Total Retention Bonus”). Unless expressly stated in this Agreement, the Total Retention Bonus shall not be earned unless Employee remains employed by the Company, or one of its related companies or subsidiaries, in Good Standing for the entire period between the Effective Date and the applicable Retention Period stated below. Employee understands and agrees that if Employee does not satisfy the criteria set forth in this Agreement, including if Employee elects to terminate employment with the Company for any reason prior to the end of the applicable Retention Period, except as expressly stated in this Agreement, Employee will not have earned the part or parts of the Total Retention Bonus for which the Retention Period has not been completed. The Total Retention Bonus shall be divided into two bonus opportunities, as follows:
First Retention Bonus. Employee is eligible to earn 50% of the Total Retention Bonus (“First Retention Bonus”) if Employee satisfies all other criteria in this Agreement and remains employed in Good Standing through December 31, 2024 (“First Retention Period”).
Second Retention Bonus. Employee is eligible to earn 50% of the Total Retention Bonus (“Second Retention Bonus”) if Employee satisfies all other criteria in this Agreement and remains employed in Good Standing through December 31, 2025 (“Second Retention Period”).
Payment Of Unearned Bonus; Clawback Restrictions. The Retention Bonus will be paid to Employee in two lump sum amounts, each of which are subject to all applicable taxes and withholding. Employee understands and acknowledges that the full amount of each portion of the Retention Bonus paid to Employee is subject to clawback by the Company until the applicable Retention Bonus is considered earned under the terms of this Agreement, either by Employee satisfying the vesting conditions or under circumstances expressly provided herein. If, prior to the end of the applicable Retention Period, Employee’s employment is terminated by the Company for Cause, or if Employee elects to terminate Employee’s employment for any reason other than Good Reason, if applicable, as set forth in Section 3, then if the termination occurs prior to the end of (i) the First Retention Period, Employee is subject to clawback by the Company of the First Retention Bonus, and (ii) the Second Retention Period, Employee is subject to clawback by the Company for the Second Retention Bonus. In that event, Employee acknowledges and agrees that the applicable portion of the Total Retention Bonus is subject to clawback and will repay either the gross amount of the First Retention Bonus or the gross amount of the Second Retention Bonus, as applicable. a.The First Retention Bonus will be paid to Employee, subject to this Section 6, on a regularly-scheduled payroll date within 30 days following the Effective Date. b.If Employee earns the First Retention Bonus and remains employed in Good Standing, the Second Retention Bonus will be advanced to Employee, subject to this Section 6, on the second regularly-scheduled payroll date in January 2025.
Purpose of Retention Bonus. Employee is being offered a Retention Bonus in order to encourage Employee to remain employed with the Company through February 1, 2022. The “Retention Period” shall begin on April 1, 2020 and shall end on February 1, 2022. This Agreement shall not modify the duration of the Employee’s employment with the Company, and the Employee remains an employee-at-will during the entire time of employment with the Company.
Retention Bonus Amount. The Company shall pay to Employee a total amount of $500,000.00, less applicable state and federal taxes and withholdings, as a Retention Bonus if Employee remains employed during the entire Retention Period and complies with all other conditions stated in this Agreement and otherwise meets all conditions precedent to earn the Retention Bonus. The Retention Bonus shall be subject to standard withholdings.
Conditions Required To Earn Retention Bonus Payment. In addition to remaining employed during the Retention Period, Employee also must comply with the following conditions to receive a Retention Bonus Payment: (a) Resignation and Termination for Cause. Employee shall not resign Employee’s employment prior to the end of the Retention Period, nor shall Employee commit any action that results in a performance problem or violation of Company policy, which leads to termination for cause. The term “cause” is defined for purposes of this Agreement to include any act of dishonesty or disloyalty, fraud, conviction of a felony or conviction of a misdemeanor involving moral turpitude, and/or willful misconduct in the performance of Employee’s job duties. If either of these events occurs prior to the end of the Retention Period, Employee shall not earn the full Retention Bonus and may be obligated to repay a portion of the Retention Bonus already paid in compliance with Section 5 below; (b) Compliance with Applicable Laws. Employee shall at all times comply with laws (whether domestic or foreign) applicable to Employee’s actions on behalf of the Company; and
Payment of Retention Bonus: If Employee is employed through the Retention Period, the Retention Bonus will be paid out in accordance with the following payment schedule: (a) First Payment Installment: Company shall pay Employee $100,000.00, less applicable state and federal taxes and withholdings, on the first pay period following March 31, 2021; (b) Second Payment Installment: Company shall pay Employee $400,00.00, less applicable state and federal taxes and withholdings, on the first pay period following February 1, 2022 (collectively, “Installment Payments”).
Forfeiture/Repayment of Retention Bonus. Employee agrees that in the event Employee does not earn the Retention Bonus, in full or in part, because Employee did not fulfill the obligations set forth above in Section 3, then Employee agrees to either forfeit future Installment Payments and/or repay previous Installment Payments already made as follows: (a) Resignation: If the Retention Bonus is not earned because Employee resigns employment prior to the end of the Retention Period, Employee agrees to forfeit any future unpaid Installment Payments as set forth in Section 4 above. Employee shall retain and not be required to repay any previous Installment Payments that were already made. (b) Termination for Cause: If the Retention Bonus is not earned because Employee is terminated for cause, Employee agrees to repay any previous Installment Payments already made within 10 business days of being notified of such termination. The Company agrees to provide Employee with notice of this fact and request that repayment of all previous Installment Payments be made within 10 business days. Employee further understands that if he fails to repay the previous Installment Payment already made within the 10 business days, that Employee will be in breach of this Agreement and that the Company can take legal action to recover the any previous Installment Payments made but unearned. (c) Death, Disability, or Termination Without Cause: If the Retention Bonus is not earned because Employee dies, becomes disabled and unable to work, or is terminated without cause, Employee shall be entitled to the full Retention Bonus. Employee shall retain and not be required to repay any previous Installment Payments already made, as well as, be entitled to payment of any future Installment Payments payable in compliance with Section 4 above.
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Weber Inc.Retention Bonus. The Employee shall be entitled to two (2) lump-sum cash payments. The first payment of € l.04M shall be made September 30, 2020 and the second payment of € 1..32M shall be made September 30, 2022 after deduction of the amounts to be withheld by law (the “Retention Bonus”), if the Employee: a. is continuously employed full-time by the Company from the Effective Date to September 30, 2021 for the first payment and September 20, 2023 for the second payment (the “Retention Periods”), and b.maintains the confidentiality of all terms of this Agreement, including the Retention Bonus(s) amounts, from all persons and entities other than the Employee’s spouse, tax, or legal advisors, except as required by applicable law or unless disclosure is authorized by the Company in writing.
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Weber Inc.Death. If the Employee’s employment is terminated prior to the end of the Retention Period as a result of the Employee’s death and the Employee satisfies the conditions in Sections 2.b. and 2.c., then the Employee’s beneficiary (or beneficiaries) shall be entitled to a lump-sum cash payment equal to a proportionate amount of the Retention Bonus (“Proportionate Retention Bonus”). The Proportionate Retention Bonus shall be calculated by multiplying the Retention Bonus amount by a fraction, the numerator of which is equal to the number days the Employee was employed with the Company during the Retention Period and the denominator of which is the total number of days in the Retention Period.
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KnowBe4, Inc.You have been identified as a part of the KnowBe4 team whose job responsibilities are deemed critical to meet the demands of the pending merger (the “Merger”) with an affiliate of Vista Equity Partners Management, LLC, including, without limitation, helping to drive the Merger to a successful conclusion and assisting with KnowBe4’s business continuity. As such, we are requesting your continued support and professionalism during this process. In addition, we are offering you an incentive to continue your employment with KnowBe4 through the closing of the Merger in the form of a retention bonus equal to $1,375,000 USD (the “Retention Bonus”), which is governed by the terms and conditions of this letter, (the “Letter”). For purposes of this letter, “KnowBe4” includes its successor entity after the closing of the Merger.
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KnowBe4, Inc.The Retention Bonus will be paid in two equal installments and is subject to your continued employment with KnowBe4 on the terms and conditions set forth below through the applicable vesting dates. The first fifty percent (50%) of the Retention Bonus will vest if you remain employed with KnowBe4 on the terms and conditions set forth below through the closing of the contemplated Merger. The remaining fifty percent (50%) of the Retention Bonus will vest if you remain employed with KnowBe4 on the terms and conditions set forth below through ninety (90) days following the closing of the contemplated Merger. Additionally, the Merger must close in either calendar year 2022 or 2023 for you to receive any portion of the Retention Bonus.
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KnowBe4, Inc.Receipt of the Retention Bonus is also contingent upon you keeping the nonpublic specifics of the Merger confidential.1 You must also remain employed with KnowBe4 through the vesting dates specified above in the same or substantially similar role and perform your assigned work duties (including any additional duties assigned to you in an effort to successfully bring the pending Merger to a close) in a professional manner and at an acceptable level, as determined by KnowBe4 in its sole discretion. You will not be eligible for the Retention Bonus (and the Retention Bonus will not vest) if, prior to and in accordance with the dates specified above, you are no longer employed with KnowBe4 for any reason (other than as a result of a termination without cause, as specifically provided below) or have given notice of your resignation, you breach your confidentiality obligations, you change positions to another role and are no longer performing substantially similar duties as the ones you are performing now, or, prior to the closing of the Merger, you fail to perform your duties to KnowBe4’s expectations.
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KnowBe4, Inc.If the above requirements are met, the Retention Bonus will be issued to you in two lump sum payments in accordance with KnowBe4’s normal payroll cycle, and paid within thirty (30) days following vesting. All such payments will be subject to applicable payroll deductions and tax withholdings (i.e., federal, state, and local tax).
What is a retention bonus?
A retention bonus (also called a stay bonus) is extra pay an employer promises an employee for staying with the company until a set date or through a specific event. Unlike a signing bonus, it is paid at the end, not the start, so the employee only gets it by staying.
Companies use retention bonuses to keep key people during a merger or acquisition, a restructuring, a system migration or a product launch, or when someone has an outside offer the company wants to beat.
How does a retention bonus work?
- The company offers it in writing, in a retention agreement or letter, with the amount and the retention date or event.
- The employee stays until the date, sometimes with performance conditions as well.
- The bonus is paid, usually as a lump sum within a set time after the date. Larger bonuses are often split, for example a third after each of three anniversaries.
- If the employee leaves early, they usually lose the unpaid part. If the company lets them go without cause, many agreements still pay it.
How much is a typical retention bonus?
There is no standard amount. It is often set as a percentage of base salary and runs higher for executives and during acquisitions. For US federal employees, retention incentives are capped at 25% of basic pay for one employee and 10% for a group, or up to 50% with OPM approval (5 CFR 575.309).
Are retention bonuses taxed?
Yes, as wages. In the US they are supplemental wages: employers can withhold federal income tax at a flat 22% (37% above USD 1 million in a year), plus Social Security, Medicare and state tax. Bonuses paid more than a short period after they vest can also raise deferred compensation questions under Internal Revenue Code § 409A, so most agreements pay soon after the retention date.
Retention bonus examples
- Acquisition: “USD 30,000, paid in three equal parts on the closing date and on its first and second anniversaries.”
- Project: “15% of base salary, paid within 30 days after the new ERP system goes live, if still employed.”
- Restructuring: “Two months’ salary for staying until the office closes on June 30.”
- Counteroffer: “USD 20,000 for staying 12 months from today, repayable pro rata if you resign earlier.”
Retention bonus vs. signing bonus vs. severance
| Retention bonus | Signing bonus | Severance pay | |
|---|---|---|---|
| Purpose | Keep an employee through a period | Win a new hire | Support an employee who is let go |
| When paid | At the end of the retention period | At the start | When employment ends |
| Lost if | The employee resigns early | Often repayable if they leave early | The employee resigns, in many plans |
What a retention bonus agreement should include
- Amount and form: a fixed sum or a percentage of salary, and whether it is paid at once or in parts.
- Retention date or event: a calendar date, a closing date or a project milestone.
- Conditions: continued employment, performance standards, no notice given.
- Leaving early: what happens on resignation, termination for cause, termination without cause, death or disability.
- Payment timing: how soon after the retention date it is paid.
- Confidentiality and clawback: whether the terms are confidential and whether the bonus can be clawed back.
Retention bonus clause example
Sample clause: Retention bonus
Add this clause to a contract, send it and get it signed in fynk.
Use it in fynk for freeHow to track retention dates
Retention bonuses fail quietly when nobody remembers the date: the payment is late, or someone leaves the day before without anyone noticing. In fynk, the retention date, amount and installments are fields in the agreement, the contract calendar shows every upcoming retention date, and reminders tell HR and payroll before a payment is due.
Which contracts contain a retention bonus?
Retention agreements, employment contracts for key people, change-of-control and transaction agreements, and offer letters. This free template is built around one:
Free templates with this clause
Related clauses
- Signing bonus A signing bonus, or sign-on bonus, is a one-time payment an employer makes to a new hire for accepting a job offer. It is taxed as wages and usually comes with a repayment clause, so the employee pays back all or part of it if they leave within a set period, such as 12 months.
- Change of control A "change of control" clause in a contract is designed to protect parties by outlining specific terms and conditions that come into effect when there is a significant shift in ownership or control of one party involved in the agreement, such as through a merger, acquisition, or sale. This clause often permits the other party to terminate the contract, renegotiate terms, or take other defined actions if such a change occurs, ensuring transparency and continuity amid organizational transitions.
- Clawback provisions Clawback provisions are contractual clauses that allow an employer or company to reclaim previously paid compensation, typically bonuses or incentives, from an employee under specific circumstances, such as financial misstatements or misconduct. These provisions aim to protect the organization’s interests by holding individuals accountable for actions that negatively impact the company’s financial health or reputation.
- Performance bonus A performance bonus clause outlines the conditions under which an employee or contractor is eligible for additional compensation based on exceeding predefined performance metrics or achieving specific targets. This incentive is designed to motivate individuals to enhance productivity and align their efforts with the organization's strategic objectives.
Frequently asked questions
At the end of the retention period, usually soon after the retention date or event. Larger bonuses are often paid in parts, for example on each anniversary of an acquisition.
Usually, if you planned to stay anyway. Check the retention date, what happens if you are laid off before it, whether you must repay anything, and whether you are giving up a better outside offer.
It depends on the agreement. Many agreements pay the bonus if the company terminates you without cause, but some do not, so check the termination section before you sign.
Make the case with facts: your role in a critical project or transition, the cost of replacing you, and any outside offer. Ask for a written agreement with a clear amount, date and termination terms.
Templates referencing “Retention bonus”
These templates contain the clause you just read about.
Employee retention agreement template
Define retention bonuses, eligibility, termination outcomes, and clawback rules to retain key employees during critical transitions.
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